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PMI typically costs **0.5 – 1% of your loan amount per year**. Let's take a second and put those numbers in perspective. If you buy a $300,000 home, you would be paying anywhere between $1,500 – $3,000 per year in mortgage insurance.

- Example 1: Calculating PMI cost with PMI rate. ...
- Step 1 – Determine your loan-to-value ratio. ...
- Step 2 – Multiply the mortgage loan amount by your specific PMI rate according to the lender's chart. ...
- Step 3 – Divide annual PMI by 12 to find the monthly PMI amount.

Paid either monthly or in a lump sum upfront, typically, you can expect PMI to cost between **0.58% to 1.86% of the loan amount** according to mortgage insurance data from the Urban Institute. In dollars, Freddie Mac estimates this to look like $30 to $70 per $100,000 added to a monthly mortgage payment.

But in general, the cost of PMI is about 0.5-1.5% of the loan amount per year. This is broken into monthly installments and added to your monthly mortgage payment. So for a $250,000 loan, mortgage insurance would cost around **$1,250-$3,750 annually or $100-315 per month**.

Private mortgage interest (PMI) is required when the down payment on a house is under 20% of the selling price. As of 2020, the rate varies **between 0.5% and 1.5% of the loan**.

Unfortunately, you foot the bill for the premiums, and lenders almost always require PMI for loans where the down payment is less than 20%. **They add the cost to your mortgage payment each month, in an amount based on how much you've borrowed**.

While the amount you pay for PMI can vary, you can expect to pay approximately **between $30 and $70 per month** for every $100,000 borrowed.

The traditional way to avoid paying PMI on a mortgage is to **take out a piggyback loan**. In that event, if you can only put up 5 percent down for your mortgage, you take out a second "piggyback" mortgage for 15 percent of the loan balance, and combine them for your 20 percent down payment.

To sum up, when it comes to PMI, if you have less than 20% of the sales price or value of a home to use as a down payment, you have two basic options: **Use a "stand-alone" first mortgage and pay PMI until the LTV of the mortgage reaches 78%, at which point the PMI can be eliminated**. 2. Use a second mortgage.

When it comes to calculating mortgage insurance or PMI, **lenders use the “Purchase price or appraised value, whichever is less” guideline**. Thus, using a purchase price of $200,000 and $210,000 appraised value, the PMI rate will be based on the lower purchase price.

One way to avoid paying PMI is to **make a down payment that is equal to at least one-fifth of the purchase price of the home**; in mortgage-speak, the mortgage's loan-to-value (LTV) ratio is 80%. If your new home costs $180,000, for example, you would need to put down at least $36,000 to avoid paying PMI.

Is PMI deductible? The legislation, signed into law Dec. 20, 2019, **not only makes the deduction available again for eligible homeowners for the 2020 and future tax years**, but also enables taxpayers to take it retroactively for the 2018 and 2019 tax years by filing amended returns.

You can avoid paying for private mortgage insurance, or PMI, by making **at least a 20%** down payment on a conventional home loan.

**FHA mortgage loans don't require PMI**, but they do require an Up Front Mortgage Insurance Premium and a mortgage insurance premium (MIP) to be paid instead. Depending on the terms and conditions of your home loan, most FHA loans today will require MIP for either 11 years or the lifetime of the mortgage.

**Divide the loan amount by 100 and you will get the annual MIP amount**. The FHA requires you to pay MIP in monthly installments, therefore, you can divide the annual amount by 12 to get the monthly payment for MIP: $679,650 / 100 = $6,796.50; $6,796.50 / 12 = $566.375.

Your credit score and LTV ratio determine your PMI cost, but the price range may fall somewhere **between $30 and $70 per month for each $100,000 you borrow for your home purchase**. As previously mentioned, in many cases, FHA mortgage insurance premiums are in place for the life of your loan.

**Use a “piggyback loan” with 10% down and no PMI**

Another way to avoid PMI is by using a piggyback mortgage. This is a unique loan structure where the buyer needs only 10% down in cash. The buyer then takes out a second mortgage loan, which provides another 10% of the home's purchase price.

Before buying a home, **you should ideally save enough money for a 20% down payment**. If you can't, it's a safe bet that your lender will force you to secure private mortgage insurance (PMI) prior to signing off on the loan, if you're taking out a conventional mortgage.

If you weren't able to put down 20% when you purchased the property, **you can have PMI waived once you've built up enough equity over time**. But your lender isn't going to automatically cancel your PMI premium once you've reached 80% LTV. You'll have to reach out and request it.

**The only way to cancel PMI is to refinance your mortgage**. If you refinance your current loan's interest rate or refinance into a different loan type, you may be able to cancel your mortgage insurance.

Whether you'll need PMI on the new loan will depend on your home's current value and the principal balance of the new mortgage. **You can likely get rid of PMI if your equity has increased to at least 20% and you don't use a cash-out refinance**.

**No, PMI does not decrease over time**. However, if you have a conventional mortgage, you'll be able to cancel PMI once your mortgage balance is equal to 80% of your home's value at the time of purchase.

If you've owned the home for **at least five years**, and your loan balance is no more than 80 percent of the new valuation, you can ask for PMI to be cancelled. If you've owned the home for at least two years, your remaining mortgage balance must be no greater than 75 percent.

Taxpayers have been able to deduct PMI in the past, and **the Consolidated Appropriations Act extended the deduction into 2020 and 2021**. The deduction is subject to qualified taxpayers' AGI limits and begins phasing out at $100,000 and ends at those with an AGI of $109,000 (regardless of filing status).

PMI Premium: **The higher the PMI premium, the more likely the higher rate is a better deal**. Premiums vary with the type of loan, term, down payment and other factors. The Rate Increment: The smaller the increase in the interest rate charged in lieu of PMI, the greater the advantage of the higher rate loan.