How to Calculate PMI on a Conventional Loan (2026 Guide)

Private Mortgage Insurance (PMI) is the monthly fee conventional lenders charge when you put down less than 20% on a home. On a typical $300,000 loan with 5% down and a 720 credit score, PMI runs about $150-$185 per month — roughly $54,000 over the life of a 30-year loan if you never cancel it. Understanding how PMI is calculated, priced, and cancelled is one of the highest-leverage things you can do as a homebuyer. Here's the math, the rate tables, and the cancellation rules for 2026.

What PMI Is — and What It Isn't

PMI protects the lender, not you. If you default and the lender forecloses at a loss, the mortgage insurer reimburses the lender for a portion of the loss. You pay the premium; the lender gets the benefit. The reason PMI exists is that loans with less than 20% down have historically defaulted at higher rates, and insurers absorb that risk so lenders are willing to originate low-down-payment loans.

PMI is not:

• FHA MIP — that's the FHA's own mortgage insurance, with different rates and cancellation rules (see the FHA Calculator)
• VA funding fee — a one-time upfront fee, not monthly
• Homeowners insurance — covers your property; PMI covers the lender's loan

The PMI Formula

PMI is quoted as an annual premium rate (a percentage of the loan amount), then divided by 12 and added to your monthly payment:

Monthly PMI = (Loan Amount × Annual PMI Rate) / 12

Example: $300,000 loan at 0.55% annual rate.

$300,000 × 0.0055 = $1,650/year $1,650 ÷ 12 = $137.50/month

That's it. The hard part is figuring out which annual rate applies to your loan.

PMI Rate Tiers (2026)

Annual PMI rates range from 0.15% to 2.5%+ of the loan amount. The rate is set by private mortgage insurers (MGIC, Radian, Enact, Essent, Genworth) based on:

1. Loan-to-Value ratio (LTV) — the lower your down payment, the higher the rate
2. Credit score — higher scores get substantially lower rates
3. Loan type — fixed vs ARM, occupancy (owner vs investment), property type
4. Coverage type — borrower-paid (BPMI) vs lender-paid (LPMI) vs single-premium

Indicative BPMI Rate Matrix (30-Year Fixed, Owner-Occupied)

These are representative 2026 quotes from the Mortgage Insurance Companies of America rate filings; your actual quote will vary by insurer and lender.

Reading the Table

A borrower with a 680 credit score and 5% down pays about 0.95% annually. On a $300,000 loan:

$300,000 × 0.0095 = $2,850/year = $237.50/month

A borrower with a 760 credit score and the same 5% down pays 0.41%:

$300,000 × 0.0041 = $1,230/year = $102.50/month

The credit-score spread on the same loan is $135/month — $48,600 over 30 years. This is why raising your score from 680 to 760 before applying is one of the highest-ROI financial moves you can make.

How to Calculate PMI on Your Loan

Step 1: Determine Your Loan Amount

Home Price − Down Payment = Loan Amount

Example: $350,000 home, 5% down ($17,500) → Loan = $332,500

Step 2: Determine Your LTV

Loan Amount ÷ Home Price = LTV

$332,500 ÷ $350,000 = 0.95 = 95% LTV

Step 3: Find Your Credit Score Tier

Pull your FICO 8 score from all three bureaus. Lenders use the middle of the three scores (or the lowest, for joint applicants). Round down to the nearest tier in the table above.

Step 4: Look Up the Annual Rate

Use the matrix above or get a quote from your lender. For a 720 score at 95% LTV: 0.62%.

Step 5: Compute the Monthly Premium

$332,500 × 0.0062 = $2,061.50/year $2,061.50 ÷ 12 = $171.79/month

Add this to your principal-and-interest payment, property tax, and insurance to get your full PITI. The Mortgage Calculator does this automatically.

PMI Variants: BPMI, LPMI, Single-Premium, Split

LPMI trap: LPMI is built into your rate. If rates drop and you refinance, you lose the LPMI coverage and may need new PMI on the new loan — defeating the purpose.

When and How to Cancel PMI

The Homeowners Protection Act (HPA) of 1998 gives you two cancellation paths on conventional loans:

1. Automatic Cancellation at 78% LTV

The lender must automatically cancel PMI the month after your loan-to-value reaches 78% of the original purchase price (or appraised value, if lower), provided your payments are current. This happens on a fixed amortization schedule regardless of home price changes.

2. Requested Cancellation at 80% LTV

You can request cancellation the month after your LTV reaches 80% of the current home value. This is where appreciation helps — if your home's value has risen, you can cancel years earlier than the automatic 78% trigger.

Requirements for requested cancellation:

• 80% LTV based on current value (you typically pay for a new appraisal, $400-$600)
• Minimum 2 years of on-time payment history (or 6 months if LTV is already below 75%)
• No second mortgages or HELOCs that push combined LTV above 80%
• Property in good condition, no decline in value

3. Final Termination at Loan Midpoint

For 30-year loans, PMI must terminate at the halfway point of the amortization schedule (15 years), assuming payments are current — even if LTV hasn't reached 78%.

Example: Canceling Early via Appreciation

You bought a $300,000 home with 5% down. Original loan = $285,000. Five years later, you've paid the balance down to $260,000 and home values in your area are up 25% — your home is now worth $375,000.

$260,000 ÷ $375,000 = 69.3% LTV

You're well below 80%. Order an appraisal ($500), submit a cancellation request, and the lender must cancel within 30 days if everything checks out. Saving $150/month for the remaining 25 years = $45,000.

PMI vs FHA MIP: Which Is Cheaper?

FHA's MIP is structured differently — there's an upfront premium (1.75% of loan) plus an annual premium (0.55% for 95%+ LTV) that, for loans originated after June 3, 2013, cannot be cancelled for the life of the loan unless you refinance to a conventional product.

On a $300,000 FHA loan:

• Upfront MIP: $5,250 (typically financed into the loan)
• Annual MIP: $1,650/year = $137.50/month, forever (or until refi)

On a $300,000 conventional loan at 0.62% (720 score, 5% down):

• Upfront: $0
• Annual: $1,860/year = $155/month, but cancelable at 80% LTV

Conventional looks more expensive monthly but is vastly cheaper over 5+ years because you can cancel PMI. FHA's MIP for life is a major long-term cost. Run both scenarios with the FHA vs Conventional Calculator.

Strategies to Reduce or Eliminate PMI

1. Put 20% Down

The cleanest solution. On a $300,000 home, that's $60,000. If you don't have it, consider waiting 12-24 months and saving aggressively — the PMI savings alone can exceed $15,000 over the loan.

2. Piggyback Loan (80-10-10)

Get a first mortgage at 80% LTV (no PMI), a second mortgage or HELOC at 10% LTV, and put 10% down. The second mortgage has a higher rate but is typically a 15-20 year term — overall cost is often lower than PMI. Not all lenders offer piggyback loans; ask around.

3. Raise Your Credit Score First

Going from 680 to 760 can cut your PMI rate in half. Use a 3-6 month credit-building plan: pay down credit card balances below 30% utilization, dispute any errors, and avoid new credit applications. Check your free credit report at AnnualCreditReport.com.

4. Buy a Slightly Cheaper Home

The difference between 95% LTV and 90% LTV can save 0.10-0.25% per year in PMI rate. On a $300,000 loan, that's $300-$750/year.

5. LPMI if You Won't Stay Long

If you'll sell or refinance within 5 years, LPMI's slightly higher rate can be cheaper than paying monthly BPMI you won't have time to cancel.

Next Steps

1. Plug your loan amount, credit score, and down payment into the Mortgage Calculator to see your estimated PMI
2. Compare conventional vs FHA side-by-side with the FHA vs Conventional Calculator
3. Test your debt-to-income ratio with the DTI Calculator before applying
4. Read the full mortgage payment guide for the underlying PITI formula

Sources: Mortgage Insurance Companies of America 2026 rate filings, Urban Institute Housing Finance Policy Center, Homeowners Protection Act of 1998 (12 U.S.C. 4901-4909), Fannie Mae Selling Guide (PMI eligibility, 2026 update), Freddie Mac Primary Mortgage Market Survey (Q2 2026).