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How to use Credit Karma’s PMI calculator for a mortgage loan
Private mortgage insurance, or PMI, is a type of home loan insurance that you’re typically required to pay if you take out a conventional mortgage and put down less than 20%. You may also be on the hook for PMI if you refinance your mortgage and don’t have at least 20% in home equity.
You’ll typically pay for PMI through a monthly premium that’s part of your mortgage payment, but you may also pay upfront at closing or a combination of both.
Our PMI calculator can help you calculate your monthly mortgage payment with PMI. It can also help you come up with an amortization schedule for your mortgage — the amounts that go toward your principal and interest each month.
Keep in mind that this calculator only provides an estimate based on what you input. Here’s the information you need to estimate your PMI.
- Your target home price
- Down payment
- Loan amount
- Estimated interest rate
- Loan term (in years)
- Estimated FICO score
- Mortgage insurance rate (%)
Your target home price
Enter the dollar amount of the home you plan to buy. If you don’t have a particular home in mind, you can always estimate a home price that fits comfortably with your budget. Remember that a larger down payment usually reduces your interest rate and fees. Even if you can’t put down 20%, a down payment closer to that amount can make your home more affordable.
Plug in the down payment amount that you can afford. Remember that a larger down payment usually reduces your interest rate and fees. Even if you can’t put down 20%, a down payment closer to that amount can make your home more affordable.
This is the amount you’ll borrow after your down payment and any extra fees are added in.
Estimated interest rate
The interest rate is how much you’ll pay to borrow money, expressed as a percentage. Your APR, or annual percentage rate, factors in the interest as well as any points, fees or other charges included in your mortgage loan. Factors such as your credit scores, down payment and loan amount can all affect the interest rate. The higher your credit scores, the better the interest rate you can expect. And bear in mind that it’s a good idea to shop around and compare lenders to find the best rate for your situation.
If you want an idea of what interest rate you may receive, the Consumer Financial Protection Bureau offers a mortgage rate tool that lets you explore rates based on factors such as where you live and your credit scores.
Loan term (in years)
The loan term is the period of time you’ll have to pay back your mortgage. It’s usually 15 or 30 years. A longer loan term can make your monthly payments more affordable, but you’ll pay more in interest over the life of your loan.
Estimated FICO® score
FICO scores are three-digit scores based on credit-scoring models created by the Fair Isaac Corporation. The numbers are generated from the information in your credit reports. Generally, the higher your credit scores, the better interest rate and terms you can land. Find out where you can get your FICO score for free.
Mortgage insurance rate (%)
The mortgage insurance rate you receive will be expressed as a percentage. It may depend on factors such as your down payment and credit score. But typically it’s around 0.2% to 2% of the loan amount per year. Credit Karma’s PMI calculator will provide an estimate for you.
How can I cancel PMI?
In most cases with conventional mortgages, you can only avoid PMI if you have 20% equity in your home. That means you can either make a 20% down payment right off the bat or cancel your PMI once you reach 20% equity.
There are several ways you can cancel your PMI. You can wait for your lender to do so automatically when you’ve paid off 22% of the original value of your home or after you’ve reached the halfway point of your loan term.
Another option is to ask your lender to cancel PMI when you pay off 20% of the original value of your home.
If you believe your home has gone up in value, you might be able to get it reappraised and then request a cancellation. You also may be able to refinance your home and potentially qualify for a conventional mortgage without PMI.
What is a loan amortization schedule?
A loan amortization schedule shows the process of repaying a loan with interest. It breaks down how much of each payment goes to the principal and how much is applied toward interest. With a loan amortization schedule, you can see how the principal and interest distribution changes over time.
You may be surprised to find out that at first, most of your mortgage payments will go to interest. As you near the end of your term, more of your payments will be allocated toward the principal. That’s why you typically won’t build up much equity in the first few years of your mortgage.
The good news is you can consider paying extra on your mortgage. Not only will this help you build equity faster to cancel PMI, it will also save you money in interest payments over the life of your loan.
How can I prepare to buy a home with a mortgage loan?
If you’re ready to buy a home with a mortgage, here are some tips to get your finances ready to buy a house.
- Check your credit: The best mortgage rates often go to people with credit scores in the mid-700s and above. But that doesn’t mean you can’t qualify with lower scores — just make sure to do your homework.
- Calculate your DTI: Your debt-to-income ratio is your monthly debt payments divided by your gross monthly income. Do some math so you know what yours is. You may find many lenders prefer a DTI of no higher than 43%.
- Save for a down payment: To get to as close to 20% down as possible, you might need to cut some expenses, boost your income or wait a little longer to buy. And don’t forget about things like moving costs, closing costs and an emergency fund.
- Shop around: Not all mortgage lenders are created equal. Explore your options so you can compare their rates, terms and fees. Make sure to gather your financial documents for when you’re ready to apply.