“Every time I hear a buyer groan about private mortgage insurance (PMI), I can’t help but think—they might be looking at it the wrong way.”

  Many buyers view private mortgage insurance (PMI) as an unnecessary expense, but that perspective overlooks its real purpose. PMI can actually serve as a valuable tool that helps homebuyers enter the market sooner and build equity faster.

Private Mortgage Insurance — Cost Burden or Path to Homeownership?

Earlier this week, Yahoo Finance (August 2025) revisited the topic of private mortgage insurance (PMI)—a cost that continues to spark debate among buyers. The report reminded us that anyone putting down less than 20% on a conventional loan must carry PMI. According to Freddie Mac, PMI generally runs $30–$70 per $100,000 borrowed, adding to a buyer’s monthly housing costs. While many see this as an unnecessary burden, the article explained how PMI also allows lenders to extend loans to buyers with smaller savings—making it possible for more households to achieve homeownership.

Expert Takeaways

1. PMI Is Not a Penalty—It’s a Bridge

Too often, PMI gets framed as a punishment for not saving a full 20%. But in my experience, that framing is misleading. PMI is less of a penalty and more of a bridge. Without it, lenders would be far more reluctant to approve low down payment loans, leaving many first-time buyers stuck renting for years. Think of PMI as the price of admission. It’s not ideal, but it can get you into the market sooner. And in a housing environment where prices rise faster than most people can save, that’s no small advantage. Would you rather pay $150–$200 a month in PMI, or risk a $50,000 jump in home prices while you’re saving for a bigger down payment?

2. The Real Cost Can Be Put in Perspective

On paper, PMI can sound daunting. But let’s break it down with an example.

Suppose you’re buying a $350,000 home with a 30-year fixed-rate mortgage at 7%, putting 10% down. Your PMI might cost around $176 per month. That’s roughly the cost of two streaming services and a few takeout nights.

When I frame it this way with clients, the conversation shifts. PMI isn’t pocket change, but it’s also not an insurmountable barrier. For many, it’s the difference between starting to build equity now versus waiting years and watching housing affordability slip further away.

3. PMI Isn’t Forever

Another myth I hear all the time: “If I get stuck with PMI, I’ll be paying it forever.” That’s simply not true.

Here are the most common exit points:

• At 80% loan-to-value (LTV): You can request PMI cancellation once you’ve paid down enough principal or your home has appreciated.
• At 78% LTV: Lenders are required by law to cancel PMI automatically (as long as you’re current on payments).
• Halfway through the loan term: For a 30-year mortgage, that means PMI is gone by year 15, even if you haven’t hit the 78% threshold.

And here’s a tip: homeowners who make extra principal payments or refinance when their home’s value jumps can often cancel PMI much sooner. It’s not a forever cost—it’s a temporary lever.

4. Not All PMI Is Created Equal

Another overlooked fact is that PMI comes in different flavors. Each option has trade-offs:

• Borrower-paid PMI (BPMI): The most common type, rolled into your monthly payment. It’s predictable and easy to budget for.
• Lender-paid PMI (LPMI): The lender pays it upfront, but you’ll take on a higher interest rate. Better for short-term homeowners who plan to refinance.
• Single-premium PMI: Paid entirely at closing in one lump sum. This can lower monthly payments but requires extra cash upfront.
• Split-premium PMI: A hybrid approach—part paid upfront, part added monthly. Useful for buyers balancing closing costs and monthly affordability.

If you’re shopping for a mortgage, it’s worth asking your lender to run the numbers across these PMI structures. A little comparison shopping can save you thousands.

Guidance for Buyers and Investors

• For First-Time Buyers: Don’t let PMI be the reason you sit out. Yes, it adds cost, but in many cases, home appreciation outpaces PMI within just a couple of years. Think of it as a temporary toll on the road to ownership.
• For Sellers: Be aware that PMI is what enables many buyers to afford your property. If you’re in a competitive market, understanding how PMI affects affordability can help you negotiate with confidence.
• For Investors: Sometimes, paying PMI can actually speed up portfolio growth. If leveraging PMI allows you to acquire an appreciating property a year or two earlier, the returns can far outweigh the temporary insurance cost.

Quick Explainer

What is private mortgage insurance (PMI), and how much does it cost?

PMI is an insurance policy that protects the lender—not the buyer—if you default on your mortgage. Most borrowers pay it monthly, typically $30–$70 per $100,000 borrowed, until they reach 20% equity.

Final Thought

I’ve seen too many buyers delay their dreams because of PMI “sticker shock.” My view? PMI is less of a burden and more of a stepping stone—one that gets you into the market while building equity faster than waiting on the sidelines. If you’re weighing your options, my best advice is this: ask your lender to run two scenarios—one with PMI, one with 20% down. You might be surprised at which path builds wealth faster.

Reader Q&A

Can I avoid PMI altogether?

Yes—by putting 20% down, using a piggyback loan, or choosing lender-paid PMI (though that often means higher interest).

Does PMI protect me as the buyer?

Not directly. PMI protects the lender. But indirectly, it helps you by making low down payment loans possible.

What’s the fastest way to cancel PMI?

Make extra principal payments or refinance after your home appreciates. Either strategy helps you hit that 80% equity threshold sooner.