Fact-Checked & Reviewed by: David Chen, CFA
Use this precise tool to instantly determine your estimated **Monthly Mortgage Insurance (MI) Payment** based on your loan amount and the required annual MI premium rate. Understanding this cost is crucial for accurate budgeting.
Mortgage Insurance Calculator
Estimated Monthly MI Payment:
Detailed Calculation Steps
Enter the required variables and click ‘Calculate’ to see the detailed steps.
Mortgage Insurance Calculator Formula
Variables Explained
The calculator uses the following key variables to determine your monthly mortgage insurance expense:
- Principal Loan Amount: The total amount of money borrowed from the lender before interest. This is the base amount on which the MI premium is calculated.
- Annual MI Premium Rate (%): The percentage the insurer charges annually, typically based on your Loan-to-Value (LTV) ratio and credit score. This rate is entered as a percentage (e.g., 0.5 for 0.50%).
- Monthly MI Payment (Result): The final amount added to your monthly mortgage payment (Principal, Interest, Taxes, and Insurance – PITI).
Related Calculators
Explore other financial tools to help manage your home ownership expenses:
- Mortgage Payment Calculator
- Loan-to-Value (LTV) Calculator
- Debt-to-Income (DTI) Ratio Calculator
- Down Payment Savings Calculator
What is Mortgage Insurance?
Mortgage insurance (MI), often referred to as Private Mortgage Insurance (PMI) on conventional loans, is a policy that protects the mortgage lender—not the borrower—if the borrower stops making payments. It is typically required when a homebuyer makes a down payment of less than 20% of the home’s purchase price. Because the lender is taking on a greater risk with a lower down payment, MI acts as a safeguard against potential losses.
The cost of MI is calculated as a percentage of the loan amount and is generally paid monthly, alongside your principal and interest payment. For conventional loans, the MI requirement can be canceled once your equity reaches 20-22% of the home’s original value, or when your loan-to-value (LTV) ratio drops below 80%.
How to Calculate Monthly MI (Example)
Follow these steps to understand how the calculator arrives at your monthly MI payment:
- Determine the Annual Premium: Convert the Annual MI Rate percentage into a decimal. (e.g., 0.50% becomes 0.005).
- Calculate Annual MI Cost: Multiply the Principal Loan Amount by the Annual MI Rate (decimal form). This gives you the total annual MI cost.
- Calculate Monthly MI Payment: Divide the total Annual MI Cost by 12 (months) to find the amount that will be added to your monthly mortgage bill.
- Example: Loan Amount of $300,000 and an Annual Rate of 0.75%. Annual MI Cost = $300,000 × 0.0075 = $2,250. Monthly MI Payment = $2,250 / 12 = $187.50.
Frequently Asked Questions (FAQ)
What is the difference between PMI and MIP?
PMI (Private Mortgage Insurance) is used for conventional loans. MIP (Mortgage Insurance Premium) is used for FHA loans. While they serve the same purpose (protecting the lender), MIP often lasts for the entire loan term, while PMI can typically be canceled once you reach 80% LTV.
Can I cancel my Mortgage Insurance?
For conventional loans with PMI, yes. The Homeowners Protection Act (HPA) requires lenders to automatically cancel PMI when the loan-to-value (LTV) ratio reaches 78%, or you can request cancellation when the LTV reaches 80%.
How is the Annual MI Rate determined?
The rate is primarily determined by two factors: your Loan-to-Value (LTV) ratio (the lower the LTV, the lower the rate) and your credit score (the higher the score, the lower the rate).
Is Mortgage Insurance refundable?
Generally, no. Monthly PMI is not refundable. However, certain types of up-front mortgage insurance premiums (common in FHA loans) may be partially refundable if the loan is refinanced or paid off early, depending on the rules at the time of origination.