You need to put down 20 percent of the home's purchase price to avoid PMI

Private Mortgage Insurance (PMI) is a monthly fee lenders charge when you borrow more than 80 percent of a home's value. If you put down less than 20 percent, the lender requires you to carry PMI until you reach 20 percent equity in the home. The only way to avoid PMI entirely is to put down 20 percent or more at closing.

This is a hard threshold, not a guideline. A 19 percent down payment still triggers PMI. A 20 percent down payment does not. The lender calculates this based on the purchase price, not the appraised value—so if you negotiate the price down after the appraisal, your down payment percentage goes up, which can push you over the 20 percent line and eliminate the PMI requirement.

If you cannot reach 20 percent, you have other routes: some lenders offer loans without PMI at higher interest rates, some programs allow piggyback mortgages (a second loan covering part of the gap), and some lenders will remove PMI once you reach 20 percent equity through home appreciation or extra payments. But the simplest path to no PMI is 20 percent down.

Key Takeaways

  • PMI is required on any loan where you borrow more than 80 percent of the home's purchase price, which means a down payment below 20 percent triggers it.
  • The 20 percent threshold is exact—19.9 percent still requires PMI, while 20 percent or higher does not.
  • PMI typically costs 0.5 to 1.5 percent of the loan amount per year, split into monthly payments added to your mortgage bill.
  • You can remove PMI once you reach 20 percent equity through appreciation or extra principal payments, but you usually have to request it in writing.
  • If reaching 20 percent down is not possible, a piggyback loan or a lender offering non-PMI mortgages at a higher rate are alternatives worth comparing.

How PMI cost changes with different down payment amounts

The lower your down payment, the higher your PMI cost. A 10 percent down payment triggers a higher PMI rate than a 15 percent down payment on the same loan. The exact cost depends on your credit score, the loan type, and the lender, but the pattern is consistent: less equity upfront means more risk for the lender, and you pay for that risk.

On a $300,000 home with a 10 percent down payment ($30,000), you are borrowing $270,000. PMI might run $150 to $400 per month depending on your credit and the lender. With a 15 percent down payment ($45,000), you are borrowing $255,000, and PMI might drop to $120 to $300 per month. At 20 percent down ($60,000), PMI disappears entirely, and you save that monthly cost for the life of the loan.

The total savings from reaching 20 percent can be substantial. Over a 30-year mortgage, eliminating a $200 monthly PMI payment saves $72,000. This is why some buyers stretch to reach 20 percent, while others accept PMI for a few years and remove it once they have built equity.

When you can remove PMI before reaching 20 percent equity

You do not have to wait until you naturally reach 20 percent equity through monthly payments. If your home appreciates in value or you make extra principal payments, you can reach 20 percent equity faster and request PMI removal. However, the process is not automatic—you have to ask the lender in writing, and they will usually require a new appraisal to confirm the home's current value.

The appraisal costs $300 to $500 out of pocket. If the appraisal shows your home is worth enough that your loan is now 80 percent or less of that value, the lender must remove PMI. Some lenders will remove it without an appraisal if you have made extra payments that mathematically put you at 20 percent equity, but most require proof of the home's value.

Timing matters here. If you are close to 20 percent equity through extra payments, an appraisal might be worth the cost if it saves you years of PMI. If you are only a few months away from 20 percent through regular payments, waiting is usually cheaper than paying for an appraisal.

Piggyback loans as an alternative to PMI

A piggyback mortgage is a second loan that covers part of the down payment gap, allowing you to avoid PMI without putting down 20 percent. The structure is typically: a first mortgage for 80 percent of the purchase price, a second mortgage (the "piggyback") for 10 percent, and your own down payment for 10 percent. This way, you borrow 80 percent on the first loan, which avoids PMI.

The catch is that the second mortgage carries a higher interest rate than the first, and you make two separate monthly payments. On a $300,000 home, you might pay 6.5 percent on the first $240,000 and 8 percent on the second $30,000, plus your $30,000 down payment. The combined cost of both loans can exceed the cost of a single loan with PMI, depending on rates and how long you keep the piggyback loan.

Piggyback loans made sense when PMI rates were higher and interest rates were lower. Today, the math is tighter. Compare the total monthly cost of a single loan with PMI against the combined payments of a piggyback structure before committing. Some lenders no longer offer piggybacks, so you may need to shop around.

Non-PMI mortgages at higher interest rates

Some lenders offer mortgages without PMI even when you put down less than 20 percent. The trade-off is a higher interest rate on the entire loan. On a $300,000 home with a 10 percent down payment, a standard loan with PMI might be 6.5 percent plus $200 monthly PMI. A non-PMI loan from the same lender might be 7.2 percent with no PMI.

Whether this is worth it depends on how long you plan to keep the loan. If you are refinancing in five years or selling in seven, the higher rate might cost less than years of PMI. If you are staying 30 years, the higher rate compounds and usually costs more. Run the numbers with your lender—they can show you the total interest paid under each scenario.

Non-PMI loans are most useful for buyers with good credit who are confident they will move or refinance within a few years. For long-term owners, reaching 20 percent down or accepting PMI temporarily is usually cheaper.

Calculating your exact down payment target

To find your 20 percent down payment target, multiply the purchase price by 0.20. On a $250,000 home, 20 percent is $50,000. On a $400,000 home, it is $80,000. This is the amount you need to bring to closing to avoid PMI.

Remember that the purchase price is what matters, not the appraised value. If you negotiate the home down from $300,000 to $285,000, your 20 percent target drops from $60,000 to $57,000. If the appraisal comes in low, your down payment percentage actually goes up relative to the appraised value, which can help you cross the PMI threshold.

Also factor in closing costs. You will need cash for both the down payment and closing costs (typically 2 to 5 percent of the loan amount). If you are stretching to reach 20 percent down, make sure you have enough left over for closing costs, or you will end up rolling those costs into the loan, which reduces your equity and could trigger PMI anyway.

State and loan-type variations in PMI rules

PMI rules are consistent across states for conventional loans, but FHA loans, VA loans, and USDA loans have different insurance requirements. FHA loans require mortgage insurance even with 20 percent down, and the insurance stays for the life of the loan if you put down less than 10 percent. VA loans do not require PMI at all, regardless of down payment. USDA loans require a may provide fee but not PMI.

If you are using an FHA loan, the 20 percent threshold does not eliminate insurance—you are paying mortgage insurance no matter what. If you are a veteran using a VA loan, you can put down zero and avoid PMI entirely. These differences can shift the entire calculation of whether to stretch for 20 percent or accept insurance.

Ask your lender which loan type you are using and what insurance or may provide fees apply. The answer changes whether 20 percent is your target or whether a different strategy makes more sense.

Frequently Asked Questions

Can I get PMI removed if I reach 20 percent equity through home appreciation?

Yes, but you have to request it in writing and usually pay for a new appraisal ($300 to $500) to prove the home's current value. Once the appraisal confirms you have 20 percent equity, the lender must remove PMI. Some lenders will remove it based on your payment history alone if you are close, but most require an appraisal.

What if I put down 19 percent—do I still have to pay PMI?

Yes. PMI is required on any loan above 80 percent of the purchase price. A 19 percent down payment means you are borrowing 81 percent, which triggers PMI. You need exactly 20 percent or higher to avoid it.

Is PMI tax-deductible?

PMI was tax-deductible for some taxpayers in past years, but the deduction expired at the end of 2024 and has not been extended. Check with a tax professional about your specific situation, as rules can change and vary by income level.

How long does PMI usually stay on my loan?

If you make regular payments, you reach 20 percent equity through amortization in roughly 8 to 12 years on a 30-year mortgage, depending on your down payment and interest rate. You can remove it sooner by making extra principal payments or waiting for home appreciation, then requesting removal in writing.

Can I borrow the down payment from someone else to avoid PMI?

Lenders allow down payment gifts from family members, but they do not allow you to borrow the down payment—that would increase your total debt and disqualify you for the loan. A gift is assistance programs with no repayment obligation; a loan is not.