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What does mortgage insurance cost?

By Liz Keuler

October 2022

Private mortgage insurance (PMI) sometimes gets a bad rap as just an extra line item on your monthly mortgage statement. It’s true that PMI can add to the monthly cost of owning a home, but it often allows you to buy sooner than you otherwise would have – and in many cases, it can be eventually canceled, lowering that monthly cost.

So, how much does mortgage insurance cost? 

As with almost everything related to the process of buying a home, the answer to that question is, “It depends.” Many factors determine how much you might pay for MI, including: 

  • The type of MI (the most common MI is monthly, but there are other options) 
  • The terms of your loan
  • The amount of your down payment 
  • Your credit history and other risk factors 

The only way to know the cost of MI in your specific situation is to consult with a loan officer.  

Examples using the average cost of mortgage insurance 

All the info above is well and good (and accurate), but I know you came here for some cold hard numbers. Our calculators include average monthly MI rates to help you get an overall sense of the cost of mortgage insurance. Let’s look at a scenario. 

According to Zillow, the value of a typical home in the US was $355,852 as of July 2022. Let’s say you have good credit and $35,000 for a 10% down payment, and your interest rate is 5.5%. Entering this scenario into our buy now vs. wait calculator shows that MI would add $109 to your monthly mortgage payment. That’s nothing to sneeze at – but keep in mind that monthly PMI usually doesn’t last forever. Once you reach 20% equity in your home based on the original value, you can request PMI be canceled (in this example, you’d probably be able to cancel it in 4 or 5 years).  

Changing any of the factors of the scenario above can change the MI rate you pay. For example, assuming all other variables above remain the same: 

  • If you have excellent credit instead of good credit, your MI rate could be $75 instead of $109
  • If you put down $11,000 (about 3%) instead of $35,000 (about 10%), your MI rate could be $161 instead of $109 
  • If the home price is $250,000 instead of $355,000, your MI rate could be $54 instead of $109 

I hope these numbers help you get an overall sense of what MI costs – but I want to stress again that the only way to know what MI might really cost in your specific situation is to talk to a lender. 

MI in real life

Feeling a little leery of averages and calculators? True story: MI helped me buy my first (and to date, only) home, and I’m willing to share the details with you. 

  • My husband and I bought our home in 2012 using a 30-year fixed-rate mortgage loan with an interest rate of 4% 
  • We had excellent credit and we put down about 10% on a house that had an overall price of $211,000 
  • PMI added about $50 to our monthly mortgage payment, and we were able to cancel it after 5 years, when our mortgage balance reached 80% of the house's original value 

I must say once again: Your mileage will vary!  

The cost of MI vs. the cost of waiting to buy a home

If you’re worried about how the cost of MI might impact your monthly mortgage payment, make sure to consider the big picture. Weigh the cost of monthly MI right now against the cost of waiting to buy a house while you save up more for a down payment.  

Using the scenario above, how long would it take you to save an additional $35,000, the amount you would need to make a 20% down payment instead of a 10% down payment? If you could save $500 a month, it would take you almost 6 years. During that time, your rent will likely go up, you will not be earning equity, and home prices will likely continue to rise – which means you’ll be delayed even further in reaching your goal of a 20% down payment.  

Whenever you decide to buy a home, make sure you understand all your options. Knowledge is power!

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Liz Keuler is the editor of Readynest. She spent a decade meandering through radio, nonprofits and the corporate world before convincing MGIC to hire her based on her staunch grammatical convictions. She lives in a charming 100-year-old bungalow on Milwaukee’s East Side. Her interests include old Ernst Lubitsch films, new action movies, 60s girl pop, Regency romance novels, word games, sewing and shallots.
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