1. What is Mortgage PMI?

Private Mortgage Insurance (PMI) is a type of insurance that lenders require when homebuyers make a down payment of less than 20% of the home's purchase price. It protects the lender if the borrower defaults on the loan.

2. How Does the Calculator Work?

The calculator uses the PMI formula:

Where:

• \( Loan \) — The principal loan amount in USD
• \( PMI\% \) — The annual PMI rate as a percentage

Explanation: The formula calculates the monthly PMI payment by converting the annual PMI rate to a monthly payment.

3. Importance of PMI Calculation

Details: Understanding your PMI costs helps in budgeting for homeownership and determining whether it might be better to wait until you can make a larger down payment to avoid PMI.

4. Using the Calculator

Tips: Enter the loan amount in USD and the PMI percentage (typically between 0.3% to 1.5% of the loan amount annually). The calculator will show your estimated monthly PMI payment.

5. Frequently Asked Questions (FAQ)

Q1: How long do I have to pay PMI?
A: Typically until you reach 20% equity in your home, either through payments or appreciation.

Q2: Can I cancel PMI once I reach 20% equity?
A: Yes, by law you can request cancellation once you reach 22% equity through payments (automatic at 78%).

Q3: Are there different types of PMI?
A: Yes, including borrower-paid monthly, single premium (upfront), and lender-paid (built into interest rate).

Q4: Does PMI protect me as the homeowner?
A: No, it only protects the lender. You would need separate mortgage protection insurance.

Q5: Is PMI tax deductible?
A: For some borrowers (with AGI below certain limits) until tax year 2026 under current tax laws.