Are you buying a home with a down payment below 20% and being asked for an extra insurance? That is the PMI (Private Mortgage Insurance), the mortgage insurance that protects the lender — not you — when your down payment is low and the loan risk is higher. It is a monthly cost added to the payment that can weigh for years. This calculator shows you your LTV, how much the PMI costs per month and per year, and above all how much principal you must repay to remove it.

What the PMI is

The PMI is an insurance the borrower pays when buying a home with a down payment below 20% of the value. It serves to protect the lender in case of default: if you do not pay and the home is sold at an insufficient price, the insurance covers the bank's loss. It is typical of high LTV (loan-to-value) mortgages. Depending on the country it takes different names — PMI in the US, mortgage insurance elsewhere — but the logic is the same: low down payment, high risk, insurance due.

What the LTV is and why it matters

The LTV (Loan-To-Value) is the ratio between the loan amount and the home value, as a percentage. With a home of 300,000 and a loan of 270,000, the LTV is 90%. It is the key risk metric for the lender: the higher the LTV, the less equity cushion you have, the higher the risk. The critical threshold is 80%: below, no PMI; above, PMI is due. Your down payment directly determines the LTV: a 20% down payment gives an 80% LTV.

How the PMI is calculated

The PMI premium is a percentage of the loan amount, typically between 0.3% and 1.5% per year depending on the LTV and the credit profile. With a loan of 270,000 and a PMI rate of 0.5%, the annual PMI is 1,350, that is 112.50 a month. The formula is annual PMI = loan amount × PMI rate. The higher the LTV, the higher usually the rate applied, so a low down payment costs double: more loan to pay on and a higher PMI rate.

The monthly cost of the PMI

The monthly PMI adds to the mortgage payment and the home insurance: it is a recurring weight that reduces what you can afford. With 112.50 a month, in a year you pay 1,350 just in insurance that does not reduce your debt: it is money that protects the bank, not builds your wealth. That is why removing the PMI as soon as possible is one of the most concrete financial goals for those who bought with a low down payment.

The principal to repay to remove it

The calculator shows how much principal you must repay to bring the LTV to 80% and remove the PMI: it is the difference between your current loan and 80% of the home value. With a loan of 270,000 on a home of 300,000, the 80% is 240,000: you must cut 30,000 of debt. You can do it with extra payments on the principal, or by waiting for the natural amortization of the mortgage to reduce the debt over time. It is the milestone that drops the PMI cost.

How the calculator works

Enter the home price, the down payment you make and the annual PMI rate applied. The calculator returns the loan amount, the LTV, the monthly and annual PMI and the principal to repay to remove it, with an assessment of your situation. It is the quickest way to understand whether you will pay the PMI, how much it will cost and how far you are from getting rid of it. Try different down payments to see the 20% threshold and its impact on the total cost.

The values you need

You need the price (or estimated value) of the home, the down payment you intend to make and the PMI rate the lender applies (indicated in the mortgage offer; if you do not know it, try typical values between 0.3% and 1%). The down payment must be lower than the price. If your down payment is already at or above 20%, the calculator confirms it: no PMI due. Simulate different down payments to understand how much it is worth putting more to avoid the PMI.

Down payment, LTV and PMI

How the down payment determines the LTV and the PMI obligation:

The magic threshold is a 20% down payment (80% LTV): reaching it removes the PMI entirely.

How to remove the PMI

Several ways to get rid of the PMI:

In many systems the PMI can be requested to be canceled at 80% LTV and drops automatically at 78%.

Example: same price, different down payments

Home of 300,000 with a PMI rate of 0.5%, as the down payment varies:

Going from 15% to 20% down payment zeroes the PMI: it is often worth finding that extra 5%.

Is it better to avoid the PMI or buy sooner?

Waiting to have the 20% down payment avoids the PMI, but it can mean postponing the purchase for years, during which home prices could rise more than you save. Buying now with a low down payment and paying the PMI temporarily can make sense if the market is growing or if the rent you pay is high. There is no single answer: the PMI is a cost, but entering the housing market sooner has a value. The calculator gives you the number to decide with awareness.

What the calculation does not consider

The calculation uses a fixed PMI rate: in reality the rate depends on the LTV, the credit score and the mortgage type, and can vary. It does not consider the differences between countries: the cancellation rules (80%, 78%) and the names change according to the jurisdiction. It does not include other forms of insurance (mortgage life) or the costs of an appraisal for reappraisal. It does not account for amortization over time. It is an estimate of the PMI cost and the threshold to reach to remove it.

Common mistakes

• Thinking the PMI protects you: it protects the lender in case of default.
• Confusing the LTV at the time of purchase with the current one (which drops with amortization).
• Not requesting the PMI cancellation once the 80% LTV is reached.
• Ignoring that a higher down payment lowers both the loan and the PMI rate applied.
• Forgetting that the PMI rules vary a lot between countries and lenders.

How to use the calculator

Enter price, down payment and PMI rate. Read the LTV and the monthly PMI cost. If you are above 80% LTV, look at the principal to repay to remove it and plan extra payments or wait for the amortization. Simulate a 20% down payment to see how much you would save by avoiding the PMI entirely. Compare the total PMI cost over time with the effort of setting aside more down payment: often the math is closer than you think.

Practical example

You buy a home of 300,000 with a down payment of 30,000 (10%) and a PMI rate of 0.5%. The calculation gives a loan of 270,000, an LTV of 90%, a PMI of 112.50 a month (1,350 a year) and a principal to repay of 30,000 to drop to 80% and remove the PMI, with the verdict "PMI due, but you are close to the cancellation threshold". Each year you pay 1,350 in insurance that protects the bank: by cutting 30,000 of debt (with extra payments or over time) you get rid of it. Enter your numbers for your real situation. The real PMI rate depends on LTV, credit and country; the cancellation rules vary by jurisdiction. It is an informational estimate, not advice.

Frequently asked questions

What is the PMI?

The PMI (Private Mortgage Insurance) is a mortgage insurance due when you buy a home with a down payment below 20% of the value (LTV above 80%). It protects the lender in case of default, not you. It is a monthly cost added to the mortgage payment.

How is the PMI calculated?

The annual PMI is the loan amount multiplied by the PMI rate. With a loan of 270,000 and a rate of 0.5%, the annual PMI is 1,350, that is 112.50 a month. The cost applies only if the LTV is above 80%.

What is the LTV?

The LTV (Loan-To-Value) is the ratio between the loan amount and the home value, as a percentage. With a home of 300,000 and a loan of 270,000, the LTV is 90%. Above 80% the PMI kicks in; your down payment directly determines the LTV.

Who does the PMI protect?

It protects the lender (the bank), not the borrower. If you do not pay the mortgage and the home is sold at a price insufficient to cover the debt, the insurance reimburses the bank. You pay the premium but the beneficiary is the creditor: that is why it is worth removing as soon as possible.

How do I remove the PMI?

By bringing the LTV to 80% or less: with the natural amortization of the mortgage, with extra payments on the principal, with a reappraisal of the home (if it is worth more) or with a refinance. In many systems you can request its cancellation at 80% and it drops automatically at 78% LTV.

How much principal must I repay to remove it?

The difference between the current loan and 80% of the home value. With a loan of 270,000 on a home of 300,000, the 80% is 240,000: you must cut 30,000 of debt. The calculator shows you exactly this figure.

How do I avoid the PMI entirely?

By making a down payment at or above 20% of the price, so the LTV starts already at 80% or less. With a home of 300,000 you need at least 60,000 of down payment. The calculator confirms "no PMI due" when you reach the threshold.

Is the PMI rate always the same?

No, it depends on the LTV, the credit score and the mortgage type. It typically varies between 0.3% and 1.5% per year: the higher the LTV and the lower the credit, the higher the rate. The calculator uses the rate you enter; check the real one in the mortgage offer.

Does a low down payment cost double?

In a sense yes: a low down payment means a bigger loan (more principal to pay PMI on) and often a higher PMI rate too (for the high LTV). Increasing the down payment reduces both, besides avoiding the PMI entirely if you reach the 20%.

Is it better to wait for the 20% or buy sooner?

It depends. Waiting avoids the PMI but can mean postponing the purchase while prices rise. Buying now with a low down payment and temporary PMI can be worth it in a growing market or if you pay a high rent. The PMI is a cost, but entering the market sooner has a value.

Does the PMI exist in all countries?

The concept yes, with different names and rules: PMI in the US, LMI in Australia, insurance for high-LTV mortgages in many other countries. The 20% down payment threshold is common, but the cancellation rules (80%, 78%) and costs vary by jurisdiction. Check the local rules.

Is it mortgage advice?

No, it is an informational tool that estimates the PMI cost and the threshold to remove it. It uses a fixed PMI rate and does not consider the differences between countries, the amortization over time or other insurances. The exact conditions should be verified with the lender.

Updated July 2026