Quick answer: PMI (private mortgage insurance) is a monthly cost lenders add when you put down less than 20%. It protects the lender, not you. You can avoid it by putting 20% down, and you can usually remove it once you reach about 20% equity — so for many buyers it’s temporary, not permanent.
Key takeaways
- PMI applies to most loans with under 20% down.
- It protects the lender, not the borrower.
- You can avoid it by putting 20% down.
- It can usually be removed at ~20% equity.
- For many buyers, PMI is a temporary cost.
Why lenders require PMI
With a smaller down payment, the lender takes on more risk, so PMI offsets that. It’s added to your monthly payment until you build enough equity. The cost varies with your loan size, down payment, and credit.
Ways to avoid or reduce PMI
- Put 20% down (no PMI on conventional loans)
- Consider lender-paid PMI (often a slightly higher rate)
- Build equity and request removal at ~20%
- Compare loan types — some structure mortgage insurance differently
Is avoiding PMI always worth it?
Not always. Waiting years to save 20% can cost more than paying PMI now and removing it later. A lender can show you the trade-off. Have questions about your situation? Book a free consultation and I’ll help you plan the next step.
Frequently Asked Questions
What is PMI?
Private mortgage insurance — a monthly cost lenders require on most loans with less than 20% down. It protects the lender, not you.
How do I avoid PMI?
Put 20% down on a conventional loan, or explore lender-paid options. Some loan types handle mortgage insurance differently.
Can I remove PMI later?
Usually yes. Once you reach about 20% equity, you can typically request removal, lowering your monthly payment.
How much does PMI cost?
It varies with your down payment, loan size, and credit, added to your monthly payment until you build enough equity.
Is it worth paying PMI to buy sooner?
Often yes. Waiting years to save 20% can cost more than paying temporary PMI and removing it as you build equity.
Written by Surbhi Gupta, REALTOR® · CA DRE# 02314083 · eXp Realty of California, Inc. Serving Fremont, Union City, Newark, Hayward & Milpitas. This article is for general education, not financial advice — confirm current figures with a licensed professional.
