Private Mortgage Insurance (PMI)

PMI protects the lender, not you, when you put down less than 20%. While it adds to your monthly payment, it also makes homeownership accessible years sooner than waiting to save a full 20%.

How PMI works

• ▸Required when your down payment is under 20% on a conventional loan.
• ▸Typically costs 0.5–1% of the loan amount annually.
• ▸Added to your monthly mortgage payment.
• ▸Can be removed once you reach 20% equity (automatic at 78% LTV on conventional loans).

Ways to avoid PMI

• ▸Put 20% down — the traditional approach.
• ▸Piggyback loan (80-10-10): a second mortgage covers part of the down payment.
• ▸Lender-paid PMI: higher rate, but no separate PMI line item.
• ▸VA loan: no PMI for eligible veterans.
• ▸Doctor/professional loans: some careers qualify for no-PMI financing.

The math: is waiting worth it?

PMI on a $386K loan at 0.75% is $241/month. If buying now with PMI means owning 4 years sooner than saving for 20%, the appreciation and principal paydown during those 4 years often dwarf the PMI paid. The PMI Strategy tool projects exactly when PMI falls off and compares the total cost of both paths.

FHA MIP is different

FHA's mortgage insurance premium (MIP) is different — it stays for the life of the loan on most cases, not just until 20% equity. The only way off MIP is usually to refinance into a conventional loan once you have 20% equity. Factor this into your FHA-vs-conventional decision.

Remove it the moment you can

On conventional loans, track your equity. Once you hit 80% LTV, request PMI cancellation in writing (you may need a new appraisal). Many owners pay PMI for years after they're eligible to drop it simply because they never asked.