How do I avoid PMI without putting 20 percent down?

There are a few common routes. A piggyback structure, sometimes called 80-10-10, pairs a first mortgage for 80 percent with a second loan or line of credit for 10 percent and 10 percent down, so the first loan never crosses the 80 percent mark that triggers PMI. Lender-paid PMI rolls the insurance into a slightly higher interest rate instead of a separate line item. Some loan programs, such as VA loans for eligible borrowers, do not use monthly PMI at all. Each route has trade-offs, so compare the all-in monthly cost rather than just the label.

How much does PMI cost per month?

PMI is usually quoted as an annual percentage of your loan balance, often somewhere in the range of a few tenths of a percent up to a bit over one percent, depending on your credit and down payment. As an illustration, on a 300,000 dollar loan, a 0.5 percent annual rate works out to about 1,500 dollars a year, or roughly 125 dollars a month. Your real rate comes from the lender, so treat any figure here as an example, not a quote.

When does PMI go away?

On a conventional loan, you can request cancellation once your balance reaches 80 percent of the home's original value, and the servicer must automatically cancel it once the balance reaches 78 percent, provided you are current on payments. Reaching that point through extra principal payments or a documented increase in value can let you drop PMI years earlier than the regular schedule. These rules apply to borrower-paid PMI on conventional loans, not to all loan types.

Is it bad to pay PMI?

Not necessarily. PMI is a real cost that protects the lender, not you, so it is reasonable to want it gone. But it is also usually temporary, and waiting several years to save a full 20 percent has its own price: more rent paid in the meantime and a purchase price that may rise while you wait. For many buyers, paying PMI for a few years and canceling it later costs less than delaying. Run both paths before deciding.

Does a bigger down payment always remove PMI?

On a conventional loan, reaching 20 percent down at purchase typically means no PMI from the start. But the 20 percent threshold is specific to how lenders price conventional loans. Government-backed loans can work differently. FHA loans, for example, carry their own mortgage insurance that often is not removed simply by reaching 20 percent equity. Confirm how insurance works for your specific loan program before assuming a larger down payment ends it.

How to Avoid PMI (and When It's Worth Paying)

What PMI is and why lenders require it

Private mortgage insurance is an extra charge on many conventional loans where the down payment is less than 20 percent of the home's value. It does not protect you, the borrower. It protects the lender against the chance that you stop paying and the home sells for less than the loan balance.

Lenders ask for it because a smaller down payment means a bigger loan relative to the property's value, a figure called the loan-to-value ratio. A loan at 95 percent of value leaves a thinner cushion than one at 80 percent, so the lender offsets that added risk with insurance you pay for. Once your equity grows enough that the cushion is large again, the reason for the insurance fades, which is why PMI is usually temporary rather than permanent.

How much PMI costs

PMI is normally quoted as an annual percentage of your loan balance, then split into monthly amounts added to your payment. The rate depends mostly on your credit profile and how much you put down: a larger down payment and stronger credit generally mean a lower rate.

As an illustration only, suppose you borrow 300,000 dollars and the PMI rate is 0.5 percent per year. That is about 1,500 dollars annually, or roughly 125 dollars added to each monthly payment. At a higher rate the figure climbs; at a lower rate it falls. These are example numbers to show the scale, not a quote or a prediction. Your lender provides the actual rate, and you can layer that monthly amount on top of principal and interest using the mortgage calculator to see the full payment.

Ways to avoid PMI

There is no single trick that fits everyone. Each of these routes removes or sidesteps PMI in a different way, and each has a trade-off worth weighing.

Put 20 percent down. The most direct route. On a conventional loan, a down payment of 20 percent or more usually means no PMI from day one. The cost is that you tie up more cash up front, which has its own opportunity cost. Use the down payment calculator to see exactly how much 20 percent is for your target price.
Use a piggyback, or 80-10-10, structure. Here a first mortgage covers 80 percent of the price, a second loan covers 10 percent, and you put 10 percent down. Because the first mortgage stays at 80 percent, it does not trigger PMI. The second loan usually carries a higher rate, so the savings depend on that rate and how quickly you pay it off.
Consider lender-paid PMI. Instead of a separate monthly charge, the lender accepts a slightly higher interest rate that covers the insurance. There is no PMI line item, but the higher rate lasts for the life of the loan unless you refinance, so it does not fall away the way borrower-paid PMI does once you reach 20 percent equity.
Check loan programs that do not use monthly PMI. Some programs work differently. VA loans for eligible borrowers, for instance, do not charge monthly PMI. Note that government-backed options often carry their own insurance or fees with their own rules, so "no PMI" does not always mean "no mortgage insurance." Read the specifics for any program you consider.

When paying PMI is actually worth it

Avoiding PMI is not always the cheaper choice once you account for what waiting costs. Saving a full 20 percent can take years, and those years are not free.

First, there is the opportunity cost of the lump sum. Every extra dollar you pile into a down payment is a dollar you are not keeping invested or holding as an emergency cushion. If hitting 20 percent would drain your savings, paying PMI on a smaller down payment can be the more resilient plan. The opportunity cost guide walks through how to weigh that trade-off.

Second, there is what happens while you save. Rent keeps flowing out each month, and home prices can move during the wait. Over long periods, US home prices have generally trended upward, though they do not rise every year and can fall in some regions and periods. If you spend three years saving to avoid a charge that would have ended in three years anyway, you may pay more in rent and a higher purchase price than the PMI ever would have cost.

The honest way to decide is to compare the two paths directly: buy now with PMI you can cancel later, or wait and buy later with a larger down payment. The how much house can you afford guide can help you size a payment you can sustain on either path.

How to cancel PMI

For borrower-paid PMI on a conventional loan, two equity thresholds matter, and they are based on the home's original value when you bought it:

The 80 percent request. Once your loan balance reaches 80 percent of the original value, you can ask your servicer to cancel PMI. You generally need to be current on payments and have a clean recent payment history.
The 78 percent automatic rule. Once the balance is scheduled to reach 78 percent of the original value, the servicer must cancel PMI automatically, as long as you are current. You do not have to ask, though it is worth tracking so you can confirm it actually happens.

You can reach those thresholds faster than the standard schedule in two ways. Extra principal payments shrink the balance sooner, which is one reason to look at an amortization schedule and see how added payments move your payoff. Appreciation can help too: if your home has gained value, a new appraisal may show you have crossed the equity line earlier, and your servicer's policy may allow cancellation based on current value rather than original value. Ask your servicer what documentation they require before paying for an appraisal.

Try the numbers

The right call depends on your price, your cash, and how long the PMI would actually last, so it is worth modeling rather than guessing. Start with the down payment calculator to see how different down payments change whether PMI applies and how much cash each one requires. Then move to the mortgage calculator to add a PMI estimate on top of principal and interest and compare full monthly payments side by side.

From there, the decision becomes clearer: if a smaller down payment plus a few years of cancelable PMI lets you buy sooner, keep a healthy cash cushion, and stop paying rent, that can beat waiting to assemble a full 20 percent. If you already have the cash to spare and your goal is the lowest possible payment, 20 percent down avoids PMI cleanly. Either way, you are choosing with the actual numbers in front of you instead of treating PMI as something to dodge at any cost.