Does PMI protect me as the buyer?

No. PMI protects the lender if you default on the loan. You pay the premium, but the beneficiary is the lender's investor. It is the price of accessing a loan with less than 20% equity at origination.

How do I get PMI removed?

Under the federal Homeowners Protection Act, PMI must be cancelled automatically when your balance reaches 78% of the original home value based on the scheduled amortization. You can request cancellation earlier at 80% loan-to-value if you have a good payment record and, in some cases, a new appraisal showing the home value has not declined. Confirm the exact process with your servicer.

Is FHA mortgage insurance the same as PMI?

No. FHA loans carry their own mortgage insurance premium (MIP) set by HUD, not private insurers. Unlike conventional PMI, FHA MIP on most low-down-payment loans does not automatically cancel when you reach 20% equity — it can run for the life of the loan. The MortgageLab calculator's PMI field models conventional private mortgage insurance only.

What PMI rate should I enter in the calculator?

A mid-range conventional PMI rate is often in the 0.5% to 1.2% annual range, varying with your credit score and loan-to-value. The examples on this page use 0.80% as a representative middle value. For the most accurate estimate, use the rate your lender or mortgage insurer quotes for your specific scenario.

Guides

When does PMI apply and what does it add to your monthly payment?

By MortgageLab · Published June 10, 2026 · Updated June 10, 2026

PMI applies the moment your down payment falls below 20% of the home price; on a $350,000 home with 5% down and a 0.80% annual PMI rate, it adds approximately $222 per month on top of the principal-and-interest payment.

The 20% threshold — how the engine defines it

Private mortgage insurance protects the lender, not the buyer, if the loan goes into default. MortgageLab's calculator charges PMI whenever the down payment is strictly less than 20% of the purchase price. At exactly 20% down, PMI is zero; at 19.9% down, it applies to the full loan amount at the annual rate you enter. This matches the conventional underwriting boundary that lenders have used for decades.

The calculator models PMI as a flat annual percentage of the loan amount divided evenly across 12 months. It does not auto-cancel when your equity crosses 20% during repayment, so the monthly PMI cost shown is conservative — it assumes PMI runs for the full term unless you refinance or request cancellation separately. Real lenders are required by the Homeowners Protection Act to cancel PMI automatically at 78% loan-to-value (22% equity), and you can request cancellation at 80% loan-to-value.

Worked examples — four down payments on a $350,000 home

These figures are estimates from the MortgageLab engine using a $350,000 purchase price, a 6.75% annual interest rate, a 30-year term, and an example PMI rate of 0.80% per year — a mid-range value; actual PMI rates vary by lender, loan-to-value, and credit score. With 5% down ($17,500), the loan is $332,500, the principal-and-interest payment is $2,156.59, and PMI adds $221.67 per month for a combined PI-plus-PMI of $2,378.26. With 10% down ($35,000), the loan is $315,000, PI is $2,043.08, PMI is $210.00, and the combined figure is $2,253.08.

With 15% down ($52,500), the loan is $297,500, PI is $1,929.58, PMI is $198.33, and the combined figure is $2,127.91. With 20% down ($70,000), the loan is $280,000, PI is $1,816.07, and PMI drops to zero — combined PI-plus-PMI is $1,816.07. Moving from 5% to 20% down reduces the monthly PI-plus-PMI by $562.19 and eliminates the insurance layer entirely. These are estimates only; enter your own numbers for a personalized figure.

How PMI cost scales with the loan amount

Because PMI is charged as a percentage of the loan balance, the dollar cost moves with how much you borrow. A larger loan or a smaller down payment both increase the balance and therefore the monthly PMI charge. In the examples above, each 5% step down in down payment costs roughly $11–12 more per month in PMI alone, because the loan amount rises by $17,500 with each step and 0.80% of $17,500 spread over 12 months is about $11.67.

The PMI rate itself also varies. Borrowers with stronger credit scores and lower loan-to-value ratios typically receive lower PMI rates, while those closer to the 5% floor or with lower scores may see rates above 1.0%. The calculator lets you change the PMI annual percentage to match what your lender quotes so the estimate reflects your actual scenario.

What reaching 20% equity means

Two paths lead to the PMI cancellation threshold. The first is making a down payment of at least 20% at origination — PMI never starts. The second is building equity through payments over time until your loan balance falls to 80% of the original home value. Under the federal Homeowners Protection Act, a lender must cancel PMI automatically when the balance reaches 78% of the original value (on the original amortization schedule), and you can request earlier cancellation at 80% if your payment history is clean.

On a 30-year loan with a low down payment, reaching 20% equity through payments alone takes many years — in a typical scenario with a 5% down payment, it can take over a decade. That is why the calculator's conservative no-auto-cancel assumption is useful for seeing the worst-case total cost, even though your actual PMI period will be shorter if you stay in the home and build equity.

PMI versus a larger down payment — the monthly saving

Saving to reach 20% down instead of 5% requires an extra $52,500 on a $350,000 home in this example, but eliminates the $221.67 monthly PMI charge and reduces the loan by $52,500 — lowering the PI payment by $340.52 (from $2,156.59 to $1,816.07). Together the monthly saving is $562.19. Whether the larger down payment makes sense depends on how long it would delay your purchase and what you would otherwise do with the extra savings — a question no calculator can answer on your behalf.

This is an estimate, not financial advice. PMI rates, mortgage rates, and property prices all vary. Use the figures here as a starting framework, then ask your lender for the exact PMI rate they would charge on your loan scenario before making any borrowing decision.

Questions

Does PMI protect me as the buyer?: No. PMI protects the lender if you default on the loan. You pay the premium, but the beneficiary is the lender's investor. It is the price of accessing a loan with less than 20% equity at origination.
How do I get PMI removed?: Under the federal Homeowners Protection Act, PMI must be cancelled automatically when your balance reaches 78% of the original home value based on the scheduled amortization. You can request cancellation earlier at 80% loan-to-value if you have a good payment record and, in some cases, a new appraisal showing the home value has not declined. Confirm the exact process with your servicer.
Is FHA mortgage insurance the same as PMI?: No. FHA loans carry their own mortgage insurance premium (MIP) set by HUD, not private insurers. Unlike conventional PMI, FHA MIP on most low-down-payment loans does not automatically cancel when you reach 20% equity — it can run for the life of the loan. The MortgageLab calculator's PMI field models conventional private mortgage insurance only.
What PMI rate should I enter in the calculator?: A mid-range conventional PMI rate is often in the 0.5% to 1.2% annual range, varying with your credit score and loan-to-value. The examples on this page use 0.80% as a representative middle value. For the most accurate estimate, use the rate your lender or mortgage insurer quotes for your specific scenario.