Mortgages / Financing

PMI Explained: What It Is and How to Avoid or Remove It

If you've been told you need PMI, you've probably also been told it's just "the cost of not putting 20% down", full stop, no other options. That's not quite the full picture. Here's a plain English breakdown of what PMI actually is, what it costs, how to avoid it even without a 20% down payment, and how to get rid of it once you have it.

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What Is PMI?

Private Mortgage Insurance (PMI) is coverage that conventional mortgage lenders require when you put down less than 20% of the home's purchase price. Here's the part people often misunderstand: PMI doesn't protect you, it protects the lender in case you default on the loan. You pay for it, but the insurance payout goes to them, not you.

PMI typically costs between 0.30% and 1.15% of your loan amount per year, split into your monthly payment. On a $350,000 loan, that can mean anywhere from roughly $90 to $335 extra per month, depending on your credit score, down payment size, and loan type.

How to Avoid PMI Without 20% Down

Putting down a full 20% is the most direct way to skip PMI entirely, but it's not the only one:

VA Loans: if you're eligible for a VA loan, there's no mortgage insurance requirement at all, regardless of your down payment.
Piggyback loans (80-10-10): you take a first mortgage for 80% of the price and a second, smaller loan for another 10%, putting down the remaining 10% yourself, keeping your first mortgage's loan to value right at the 80% threshold that avoids PMI.
Lender paid PMI: some lenders will cover the PMI cost themselves in exchange for a slightly higher interest rate. You're still paying for it, just built into the rate instead of as a separate line item. This can make sense in some cases and not others, worth running the numbers both ways.
Special first time buyer or income based programs: some conventional loan programs waive or reduce PMI requirements for qualifying buyers, separate from down payment assistance programs.

How to Remove PMI Once You Have It

If you already have PMI, you're not stuck with it forever. Under federal law (the Homeowners Protection Act):

Automatic cancellation at 78% loan to value (LTV): once your loan balance drops to 78% of the home's original value, through your regular payments, your lender is required to cancel PMI automatically, as long as you're current on payments.
You can request removal earlier, at 80% LTV: you don't have to wait for the automatic cutoff. Once you calculate you've reached 80% LTV, through payments, extra principal payments, or your home's value going up, you can formally request PMI removal in writing.
A new appraisal can speed this up: if your home's value has risen since purchase (very common in Florida over the past several years), a new appraisal showing you're already at 80% LTV or better can get PMI removed years earlier than your amortization schedule alone would suggest.

Most borrowers who actively manage this end up removing PMI in 2 to 5 years, instead of the 7 to 10 years it would take passively waiting on the standard schedule.

The Bottom Line

PMI isn't a life sentence, and it isn't always avoidable, but it's also not something to just accept without checking your options. If you're a few percentage points away from 20% down, it's worth running the numbers on a piggyback loan or lender paid PMI. If you already have PMI, mark your calendar for when you'll hit 80% LTV and don't wait for your lender to bring it up first.

How DomoNova Helps

DomoNova was built to make real estate and mortgages simple, including the fine print that ends up costing you money if nobody explains it. We can help you run the numbers on avoiding PMI before you buy, or figure out exactly when you'll be able to remove it if you already have a loan.

DomoNova. Real Estate and Mortgages, Made Simple.

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Frequently Asked Questions

What is PMI and why do I have to pay for it?

Private Mortgage Insurance is required by conventional lenders when your down payment is less than 20% of the home's price. It protects the lender, not you, in case you default on the loan.

How much does PMI cost?

PMI typically runs between 0.30% and 1.15% of your loan amount per year, depending on your credit score, down payment, and loan type, usually added to your monthly mortgage payment.

Can I buy a house without 20% down and avoid PMI?

Yes, in some cases. VA loans don't require mortgage insurance at all, and options like piggyback (80-10-10) loans or lender paid PMI can help you avoid a separate PMI payment even with less than 20% down.

When can I remove PMI from my mortgage?

By federal law, your lender must automatically cancel PMI once your loan balance reaches 78% of the home's original value, as long as you're current on payments. You can also request removal earlier, once you reach 80% loan to value.

Can a new appraisal help me remove PMI sooner?

Yes. If your home's value has increased since you bought it, a new appraisal showing you're already at 80% loan to value or better can get PMI removed years earlier than your original amortization schedule would suggest.