How To Avoid Private Mortgage Insurance (PMI)

Learning how to avoid private mortgage insurance (PMI) matters because PMI adds a monthly cost that builds no equity for you. Strategies range from a 20% down payment to government-backed loan programs.

Comparing loan types can help you see which options fit your down payment and timeline. Whether you're a first-time homebuyer or planning to refinance, you can start by comparing purchase mortgage options.

PMI also became tax-deductible again in 2026 — see the tax-deduction section below.

PMI is an insurance premium you pay when you have less than 20% equity in your home, meaning a loan-to-value (LTV) ratio above 80%, according to the Consumer Financial Protection Bureau (CFPB).

Think of LTV as the share of the home the lender still effectively backs, versus the share you already own. Once you reach at least 20% equity, you can request that PMI be canceled and stop making those payments.

When Is PMI Typically Required?

Lenders require PMI in three main scenarios.

1. When you're putting less than 20% down on a home purchase.

2. When you're refinancing with less than 20% equity in your property.

3. When your loan doesn't qualify for government backing through programs like FHA or VA loans.

How Are PMI Costs Calculated?

Lenders typically calculate PMI using your loan-to-value ratio, credit score, debt-to-income ratio, and loan type. The PMI rate is multiplied by the loan value, then divided by 12 to find the monthly premium.

For context, Freddie Mac estimates borrowers pay roughly $30 to $70 a month for every $100,000 borrowed. The table below shows how PMI costs can vary by risk profile.

These are illustrative examples; your actual PMI depends on your loan, credit, and lender.

What Are The PMI Structure Options?

There are four main ways PMI can be structured, each affecting your monthly payment differently.

Knowing how to avoid private mortgage insurance (PMI) comes down to lowering your loan-to-value ratio to 80% or choosing a loan program that doesn't require it.

How Does A 20% Down Payment Avoid PMI?

One straightforward way to avoid PMI is putting down at least 20% of the home's purchase price. This requires more upfront cash, but it eliminates the monthly PMI expense.

How Can You Reach The 20% Threshold?

Even if you don't have the full 20% saved, several strategies can help you get there.

• Family gifts: Lenders often allow gifts from family members to count toward your down payment.

• Lower-priced properties: Buying an inexpensive or fixer-upper home reduces the total down payment needed.

• Assistance programs: Local or employer programs may offer forgivable loans to supplement your down payment.

What Is A Piggyback Loan (80-10-10)?

A piggyback loan is a second mortgage taken out at the same time as your primary mortgage, letting you meet the 80% LTV ratio and avoid PMI.

With an 80-10-10 structure, you have a primary mortgage for 80% of the value, a second loan for 10%, and pay the remaining 10% as a down payment.

For a $500,000 home, you'd have a $400,000 primary mortgage, a $50,000 second loan, and $50,000 in cash as your down payment.

Picture stacking a second loan on top of your down payment to keep the first mortgage under the 80% PMI cutoff.

Advantages of piggyback loans:

• No PMI payments: Eliminates PMI, saving hundreds of dollars per month.

• Lower monthly costs: Potentially lower combined monthly payments than a mortgage with PMI.

• Faster equity building: More of your money goes toward equity instead of insurance premiums.

• Access to higher-priced homes: Meeting the 80% LTV requirement can make pricier properties reachable.

Disadvantages of piggyback loans:

• Higher interest rates: Second loans often carry higher rates due to increased lender risk.

• Dual payment management: You manage two separate monthly payments instead of one.

• Overleveraging risk: Borrowing too much can lead to payment difficulties.

• Complex financing: The structure requires careful management and understanding.

When Does Lender-Paid PMI Make Sense?

Lender-paid PMI makes sense when you value lower monthly payments now and expect to move or refinance before the higher rate outweighs the savings.

Your lender covers the PMI cost in exchange for a higher interest rate, often about 0.25% to 0.50% more. This higher rate continues even after you reach 20% equity. These figures are illustrative and subject to current program rules and your location and lender.

This can help if you plan to sell or refinance within five to seven years. It may also help you meet debt-to-income requirements by lowering your initial monthly payment.

Special loan programs help you avoid PMI by replacing it with government backing or lender-specific structures that don't charge a separate PMI premium.

Which Government-Backed Loans Skip PMI?

What First-Time Homebuyer Programs Can Help?

Several programs can help increase your down payment and avoid PMI. Terms vary and are subject to current program rules and your location.

Are There Profession-Based Mortgage Programs?

Yes, several lenders offer profession-based mortgage programs that reduce or waive PMI for specific careers. Terms are subject to current program rules and your location and lender.

• Physician loans: For doctors, dentists, veterinarians, and sometimes residents. They allow 0–10% down without PMI.

• Educator programs: For teachers, administrators, and sometimes support staff. Some waive PMI with less than 20% down.

• Healthcare professional loans: For RNs, LPNs, PAs, and other licensed pros, allowing reduced or no PMI with 3–5% down.

• First responder programs: For firefighters, police, and EMTs. Certain programs allow 0% down with no PMI.

What Proprietary Lender Programs Avoid PMI?

Some lenders offer their own programs that avoid PMI with lower down payments. Program terms are subject to current program rules and your location and lender.

Refinancing can help you drop PMI by replacing your current loan with a new one once you have at least 20% equity. You can request PMI cancellation at 80% loan-to-value once payments are current, but lenders must automatically remove it at 78% LTV, according to the CFPB.

What Are The Requirements For PMI Removal Through Refinancing?

The requirements center on equity, credit, income, and payment history, based on CFPB guidance under the Homeowners Protection Act.

• Sufficient equity: Your home equity should be at least 20%, meaning an LTV of 80% or less.

• Good credit score: Lenders often require a credit score of 620–700+ to remove PMI.

• Low debt-to-income ratio: Typically a DTI of less than 43%.

• Strong payment history: At least 12 consecutive months of on-time payments.

What Are The Steps To Remove PMI Through Refinancing?

The steps follow a clear sequence from checking equity to confirming removal.

1. Check your home equity: Ensure your current LTV is 80% or lower based on your home's value.

2. Review your finances: Ideally your credit score is 700+ and your DTI is under 43%.

3. Shop around for lenders: Compare offers from several lenders for a new mortgage without PMI.

4. Get a home appraisal: This provides evidence that you meet the 20% equity requirement.

5. Close and confirm PMI removal: Complete the new mortgage and verify that PMI is gone.

How Much Home Value Appreciation Is Needed To Remove PMI?

The appreciation needed to remove PMI varies with your initial down payment. For example, with 5% down on a $300,000 home, your initial loan is $285,000 (95% LTV). Your home would need to reach about $356,250 to hit 80% LTV — roughly 18.75% appreciation.

You can build equity faster by paying down principal more aggressively and by adding value to your home.

• Accelerated payments: Extra principal-only payments speed up equity. Biweekly payments add up to 13 full payments a year, cutting your balance faster.

• Refinancing considerations: A shorter term charges less interest and builds equity faster. Avoid home equity loans, which reduce equity and delay PMI removal.

• Value-adding improvements: Improvements that raise your property's value increase equity, potentially reaching 20% sooner.

The pros and cons of avoiding PMI come down to weighing upfront cash and complexity against lower monthly costs and faster equity.

What Are The Financial Benefits Of Avoiding PMI?

The financial benefits of avoiding PMI include lower monthly payments and faster equity building. For example, on a $300,000 mortgage with a 0.5% PMI rate, avoiding PMI could save about $125 a month, or roughly $7,500 over five years, plus an estimated $8,000–$9,000 in added equity. These are illustrative examples; your actual PMI depends on your loan, credit, and lender.

Long-term advantages of avoiding PMI:

• Lower monthly costs: Eliminating PMI reduces your monthly housing expenses. Pairing that with a lower mortgage rate can stretch the savings further.

• Faster equity building: Money that would go to PMI can be applied to principal.

• Improved debt-to-income ratio: Lower payments may help you qualify for larger homes or other loans.

• No wasted premiums: PMI builds no equity for the homeowner.

When Might Paying PMI Be Advantageous?

Paying PMI can make sense when waiting to save 20% would cost more than the premiums, when strong credit keeps PMI low, or when you plan to sell or refinance within a few years. These are illustrative situations; your actual PMI depends on your loan, credit, and lender.

If a temporary PMI payment gets you into a home sooner, explore low- and no-down-payment loan options.

What Are The Risks Of PMI Avoidance Strategies?

The risks of PMI avoidance strategies include higher permanent rates, added debt, and reliance on the housing market.

• Higher permanent rates: With lender-paid PMI, the increased rate continues even after you reach 20% equity.

• Additional debt: Piggyback loans create extra monthly payments and more complexity.

• Depleted cash reserves: A large down payment can leave you exposed to unexpected expenses.

• Market dependency: Relying on appreciation to remove PMI can backfire if values decline.

Yes — beginning with tax year 2026, mortgage insurance premiums are deductible again for qualifying homeowners, according to U.S. Mortgage Insurers (USMI). That means the PMI or FHA MIP you pay can lower your taxable income when you file.

The deduction had lapsed for tax years 2022 through 2025. USMI reports it was reinstated and made permanent under the One Big Beautiful Bill Act, starting in tax year 2026.

A few rules apply. You must itemize and claim the premiums on Schedule A, so the benefit mainly helps itemizers. The deduction also phases out between $100,000 and $110,000 of adjusted gross income.

This guide is for anyone trying to avoid PMI or drop it early. See which profile fits you:

• Buyers with less than 20% saved who want to skip PMI at closing.

• Veterans and rural buyers who may qualify for no-PMI VA or USDA loans.

• Recent buyers approaching 20% equity who want a removal path.

• Strong-credit buyers weighing a low, temporary PMI payment against waiting to save more.

Can I remove PMI without refinancing?

Yes, you can request PMI removal once you reach 20% equity, and it's automatically removed at 22% equity. However, you may need to pay for an appraisal to prove your home's current value.

Do all loan types require PMI?

No, government-backed loans like VA and USDA loans don't require PMI. FHA loans require a mortgage insurance premium (MIP) instead.

Is PMI tax-deductible?

Yes — starting in tax year 2026, PMI and MIP premiums are deductible again for qualifying homeowners who itemize. See the tax-deduction section above for the details.

How can I avoid PMI without 20% down?

You can avoid PMI without 20% down using a piggyback (80-10-10) loan, a no-PMI VA or USDA loan, lender-paid PMI, or down payment assistance. The right choice depends on your eligibility and how long you plan to stay.

How much does PMI cost per month?

PMI is usually a fraction of a percent up to a bit over 1% of your loan each year, paid monthly. As noted in the cost section above, Freddie Mac estimates roughly $30 to $70 a month for every $100,000 borrowed.

This guide relies on secondary sources rather than proprietary BestMoney research. BestMoney does not have a first-party survey on avoiding PMI, so we used third-party sources instead.

We verified PMI mechanics and cancellation rules against the Consumer Financial Protection Bureau and confirmed loan-program rules with the U.S. Department of Veterans Affairs. For typical PMI costs we used Freddie Mac, and for the 2026 tax-deduction change we used U.S. Mortgage Insurers.

• Consumer Financial Protection Bureau — PMI definition, cancellation, and termination rules under the Homeowners Protection Act.

• Freddie Mac (My Home) — typical PMI cost estimates for conventional loans.

• U.S. Mortgage Insurers (USMI) — mortgage insurance premium tax deduction restored for tax year 2026.

• U.S. Department of Veterans Affairs — VA Certificate of Eligibility requirements.

Knowing how to avoid private mortgage insurance (PMI) usually comes down to a few paths: a 20% down payment, a no-PMI VA or USDA loan, a piggyback loan, or refinancing once you reach 20% equity. Starting in tax year 2026, qualifying homeowners who still pay PMI can also deduct those premiums. Match the strategy to your down payment, timeline, and equity position.

Your next step is to match a PMI strategy to your budget, timeline, and equity position.

From here, you can take a few concrete actions:

• Start by comparing mortgage options to see which loan types fit your down payment.

• Already own your home? See our guide on whether refinancing makes sense.

• Just getting started? Read our first-time homebuyer guide.