Mortgage Insurance Calculator

What mortgage insurance actually is (and isn't)

Mortgage insurance is the most misunderstood line item in any home purchase. The crucial point: mortgage insurance protects the lender, not you. It's a fee the borrower pays because they're putting less than 20% down — which the lender views as higher-risk lending. If the borrower defaults and the home sells for less than the loan balance, the insurance reimburses the lender for the shortfall.

The borrower gets nothing in return except access to a loan they otherwise wouldn't qualify for. There's no protection for your family, no waiver if you become disabled, no death-benefit coverage. It's not life insurance, not disability insurance, not homeowners insurance — it's lender protection that you pay for. Many first-time buyers assume mortgage insurance protects them. It doesn't.

That said, mortgage insurance can still be a smart financial decision. It allows you to buy a home with less cash down — meaning you get into the market sooner, start building equity sooner, and potentially capture appreciation that exceeds the insurance cost. The math depends on your local market, savings rate, and the specific terms of your loan.

Mortgage insurance by country — PMI vs LMI vs CMHC

United States: PMI (Private Mortgage Insurance)

Required on conventional loans when down payment is less than 20%. Paid monthly as part of your mortgage payment. Annual rate ranges from 0.3% to 1.5% of the loan, depending on credit score and loan-to-value ratio. On a $360,000 loan at 0.8% PMI, you'd pay $2,880/year or $240/month — until your LTV reaches 78-80% and PMI is removed.

FHA loans have their own version called MIP (Mortgage Insurance Premium). Unlike PMI, FHA MIP includes both an upfront premium (1.75% of loan, typically rolled into the loan) and an annual premium (0.55-1.05% of loan, paid monthly). The annual premium on most FHA loans lasts for the full life of the loan unless you put 10%+ down (then 11 years) — a key difference from conventional PMI which drops off automatically. This makes FHA expensive long-term unless you refinance.

Australia: LMI (Lenders Mortgage Insurance)

Required on home loans with deposit below 20% of property value (LVR above 80%). Paid as a single upfront premium, typically rolled into the loan amount and amortized over the life of the mortgage. Premium rates vary by lender and LVR, typically 1-4% of the loan amount on standard LVRs and rising sharply at higher LVRs (95% LVR can attract 3-4%+ premiums).

Australian LMI is functionally a tax on first-home buyers — once paid, it doesn't drop off, can't be refunded if you refinance, and protects only the lender. Australian buyers often consider it the single biggest reason to save up to 20% deposit before buying.

Canada: CMHC Insurance

Required on insured mortgages with down payment below 20%. Paid as a single upfront premium (rolled into loan and amortized) similar to Australian LMI. Premium ranges from 2.8% to 4.5% of the loan depending on LTV — making it one of the more expensive mortgage insurance programs globally. Mandatory for federally-regulated lenders if down payment is below 20% (5% minimum for owner-occupied homes up to $500K; tiered above).

Some Canadian lenders offer alternatives via Sagen or Canada Guaranty (private insurers), with similar pricing structures. The premium is typically wrapped into the mortgage and you pay interest on it over the loan term.

United Kingdom: rarely used

UK mortgages traditionally don't require mortgage insurance in the US/AU/CA sense. Some 95% LTV mortgages may have an Higher Lending Charge (HLC) or mortgage indemnity guarantee, paid upfront, but it's far less common than PMI/LMI/CMHC.

Europe (Germany, France, Italy, Spain): varies

Generally European markets require larger down payments (typically 20-30%) rather than offering insured low-down-payment loans. Some specialized programs exist for first-time buyers but they're less standardized.

Strategies to avoid mortgage insurance

For most borrowers, avoiding mortgage insurance entirely is the cleanest financial outcome. The strategies, in rough order of effectiveness:

Save until you have 20% down

The simple approach. Run the math against your local market: if home prices are rising 3-5% per year and you can save 15% of your income, the trade-off between waiting and paying insurance gets complicated. In a hot market, paying insurance to get in sooner often wins. In a flat market, waiting is usually better. Use our Deposit Savings Calculator to see how long until you hit 20%.

Piggyback loans (80-10-10 structure, US)

Take a primary mortgage for 80% of the home value, a secondary loan (HELOC or fixed) for 10%, and put 10% cash down. The primary loan never exceeds 80% LTV, so no PMI is required. The second loan often has a higher rate, but the math can still favor this approach versus paying PMI for 5-10 years. Less available in 2024-2026 than pre-2008 but some lenders still offer it.

VA loan (US veterans)

VA loans have no mortgage insurance regardless of down payment. They charge a one-time "funding fee" (typically 1.4-3.6% of loan, can be waived for disabled veterans) but no monthly PMI. For eligible veterans this is the best mortgage product available in the US, full stop.

USDA loan (US rural)

For eligible rural properties, USDA loans allow 0% down with a low annual mortgage insurance fee (0.35%) and an upfront guarantee fee (1%). Total insurance cost is significantly lower than FHA or conventional PMI in most scenarios.

Doctor / professional loans (US)

Some banks offer specialized loans for medical residents, attorneys, and other high-future-earning professionals with low down payments and no PMI. Available from lenders like Bank of America, BMO Harris, Citizens, and many regional banks. Designed to capture relationship banking with high-earners early in their careers.

Lender-Paid Mortgage Insurance (LPMI, US)

The lender pays the insurance in exchange for a higher interest rate (typically +0.125-0.5%). No monthly PMI line item on your statement. The rate is locked in for the life of the loan, so LPMI is best for buyers who plan to stay in the home long-term and don't expect to refinance once their LTV improves.

Removing mortgage insurance once you have one

Conventional PMI (US)

By federal law (Homeowners Protection Act), PMI must be automatically terminated when the LTV reaches 78% based on the original amortization schedule. You can also request manual removal at 80% LTV by submitting a written request to your lender. Some loans allow removal earlier if home value has appreciated significantly — order a new appraisal and request reassessment.

The fastest path to removal: pay down principal aggressively. Making one extra payment per year on a 30-year mortgage typically removes PMI 3-5 years early, saving thousands in PMI premiums.

FHA MIP (US)

FHA MIP rules changed in 2013. For most FHA loans originated after June 2013, MIP cannot be removed for the life of the loan — refinancing to a conventional mortgage is the only way out. If you put down 10%+ initially, MIP terminates after 11 years. This is the #1 reason FHA loans are usually refinanced once LTV improves.

Australian LMI

LMI is paid upfront as a single premium and cannot be cancelled or refunded once paid. Refinancing the loan does not refund LMI to the borrower (though some lenders offer "LMI waivers" for refinances if the original LMI was paid in the last 1-3 years and was issued by the same insurer). Once you've paid Australian LMI, it's a sunk cost.

Canadian CMHC

Same as Australian LMI: paid upfront, non-refundable, doesn't drop off. Refinancing doesn't get you a CMHC refund. Some CMHC alternatives exist for refinances at lower premium rates, but the original insurance is gone forever.

Mortgage Insurance Calculator FAQ

Is mortgage insurance tax deductible?

In the US, PMI was tax-deductible in 2017-2021 for taxpayers with adjusted gross income under $109,000, but the deduction expired at the end of 2021 and has not been extended as of this writing. Check current IRS guidance. In Australia and Canada, mortgage insurance on owner-occupied homes is not deductible (unlike investment property loans, where it may be).

How does my credit score affect PMI rate?

Significantly. A 760+ credit score might get you 0.30-0.50% PMI; a 620-650 credit score might get you 1.20-1.50%. On a $360,000 loan, that's a difference of $216-$360/month or $2,600-$4,300/year. Improving your credit score by 60-80 points before applying typically reduces PMI premium by 40-60%.

Single premium PMI vs monthly PMI?

Some US lenders offer Single-Premium PMI — pay it all upfront (typically 2-4% of loan) instead of monthly. Math: if monthly PMI is 0.8%, you'd pay 0.8% × 8 years = 6.4% if you keep it the full life. Paying 3% upfront saves money if you stay long enough. Most buyers don't, so monthly is usually the safer default.

Can I cancel PMI by paying a lump sum to hit 20% equity faster?

Yes — and this is often the highest-return move available. Paying an extra $5,000-15,000 to push LTV below 78% can save 5-10 years of PMI premiums. ROI on the lump sum is often 15-25%+ annualized in PMI savings alone. Run the math against alternative uses of the cash (paying down high-interest debt usually wins; investing in a taxable brokerage might or might not).

Does the calculator handle FHA MIP correctly?

For ongoing FHA MIP (the annual premium), yes — use the Monthly mode with the FHA annual rate (typically 0.55-1.05%). For the FHA upfront premium (1.75% rolled into the loan), use the Upfront mode separately. FHA effectively has both, which is why FHA loans are pricier than they look.

What's a "captive" mortgage insurance arrangement?

Some banks have ownership stakes in mortgage insurance subsidiaries. This sometimes lowers premiums for their borrowers (the bank captures some of the insurance profit and passes savings on) but more often it just locks the borrower into a single MI provider. Ask your lender if they have "captive" or "preferred" MI providers, and verify their rates are competitive with the broader market.