PMI means private mortgage insurance.

It is a type of mortgage insurance you might be required to pay for if you have a conventional loan.

PMI enables borrowers to gain access to the housing market more quickly, by allowing down payments of less than 20%, and it protects lenders against loss if a borrower defaults.

**Formula to calculate PMI.**

You begin by finding the LTV, loan to value ratio and then multiply it by 100.

Then consult the lender’s PMI table to know how much PMI you warrant.

And finally multiply your mortgage loan by your specific PMI rate.

**Example:**

Suppose you took a mortgage loan of $ 500,000, if your homes value is $200,000, calculate your PMI.

- Lets begin by finding the LTV.

**= 300,000/500,000**

**= 0.6 x 100**

**= 60%**

Suppose a 60% LTV corresponds with a 0.008% PMI rate in the lenders PMI table.

Therefore;

**= 500,000 x 0.008%**

**=** **40**

Hence, your PMI is $ 40.