# How does monthly PMI payments are calculated?

I understand that if one to take a mortgage without a 20% down payment, then the mortgage lender will require to pay Private Mortgage Insurance. From reading around I found out that the PMI is a set percentage of the loan amount.

From my understanding of PMI payments, if one to take a \$400,000.00 mortgage loan, with PMI rate of 0.25%, then the annual PMI payment should be:

``````400,000.00 * 0.0025 = 1,000.00
``````

And in turn, it should be about \$83.33 per month.
But the mortgage officer threw out there a rough number of \$300.

Did I calculate it right? Is there a different equation?

If you got 0.25%, sure. But you're much more likely to get 0.5% or 1% or even more. Bankrate suggests 0.3% to 1.5% as a reasonable range, for example. The banker is probably quoting you a common percentage around the median of their experience.

The actual percentage will depend on the size of the loan and your credit score.

• That is what confuses me. The mortgage officer said the rate he used to calculate was 0.25%. But the end number did not make sense to me. I just wanted to make sure that the way I was calculating it - is the right way. Commented Nov 7, 2016 at 15:06
• I'd ask the mortgage officer, then, what exactly he was calculating, and explain your calculation. Maybe there are other fees or such involved.
– Joe
Commented Nov 7, 2016 at 15:07
• I have been told that the minimum coverage requirement for PMI is 25%-35% of the total mortgage value. Is that right? If yes, does that change how the PMI is calculated? Commented Nov 12, 2016 at 21:24

From my understanding of PMI payments, if one to take a \$400,000.00 mortgage loan, with PMI rate of 0.25%, then the annual PMI payment should be:

The calculation is right if the rate is 0.25%. However the rate is anywhere between 0.25% to 2% depending on other factors. So it seems you are offered PMI at higher rate.