How Is PMI Calculated?

PMI is usually quoted as an annual rate applied to the loan amount. Monthly PMI is that annual cost divided by 12. The rate itself comes from your lender or insurer — it is not a fixed government number. Use the PMI calculator once you have a rate to quote.

The basic formula

The loan amount is home price minus down payment. PMI applies when loan-to-value (LTV) is above 80% on many conventional loans.

Annual vs monthly PMI

Lenders often discuss PMI as a monthly line item on your statement. The underlying pricing may still be expressed as an annual percentage of the original loan balance. Some policies recalculate as the balance falls; others keep a level monthly premium for a period. Your Loan Estimate and closing disclosure show what you are actually charged.

What changes the rate you are quoted

Insurers and lenders price PMI using credit score, LTV, loan type, occupancy (primary vs investment), and sometimes location. A borrower at 95% LTV with a lower credit score may see a higher annual rate than someone at 85% LTV with strong credit. That is why this site asks you to enter the rate — we cannot know your insurer's quote.

Common misunderstanding

PMI is not calculated on the home's price each month — it is tied to the loan balance (often the original balance for quoting purposes). It also does not replace homeowners insurance, which covers the property itself. See what PMI is for the full picture.