How to Calculate Mortgage PMI

Private Mortgage Insurance (PMI) is an additional insurance required by lenders if the home buyer is unable to put down a 20 percent deposit on the house. This insurance is paid in the form of additionally monthly payments. The PMI payments continue until the home buyer has 80 percent of the house's value in equity. This guide will show you how to calculate PMI payments provided you know the PMI rate you will be charged and your expected down payment.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• Pencil
• Paper
• Calculator

1. Multiply the total value of the home you will be purchasing by the percentage down payment you will be making. This will give your down payment in dollars.

2. Subtract your down payment in dollars from the total value of the home. This is the total value of your loan.

3. Multiply the loan amount by the PMI rate being offered to get the annual PMI premium.

4. Divide the annual PMI payment by 12 to get the monthly PMI payments.

Tips & Warnings

• Keep track of when the loan is down to 80 percent of the home value to notify lenders to cancel PMI premiums: Lenders are not required automatically cancel PMI premiums until 78 percent of the home value.
• Always verify PMI rates with your lender as they can change.