Title: How To Avoid Paying Private Mortgage Insurance—PMI
Headings: How Can I Avoid Paying Private Mortgage Insurance—PMI?
How Can I Avoid Paying Private Mortgage Insurance—PMI?
6 Reasons To Avoid Private Mortgage Insurance
How Not to Pay PMI
Key Takeaways
Ending PMI Early
Advisor Insight

Content: How To Avoid Paying Private Mortgage Insurance—PMI
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Jean Folger has 15+ years of experience as a financial writer covering real estate, investing, active trading, the economy, and retirement planning. She is the co-founder of PowerZone Trading, a company that has provided programming, consulting, and strategy development services to active traders and investors since 2004. Learn about our editorial policies
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Tom Catalano holds the coveted CFP® designation from The Certified Financial Planner Board of Standards in Washington, DC, and is a Registered Investment Adviser with the state of South Carolina. Article Reviewed on January 01, 2021
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Thomas J. Catalano
Updated Jan 2, 2021
Private mortgage insurance (PMI) is an insurance policy that protects lenders from the risk of default and foreclosure. Generally, if you need financing to buy a home and make a down payment of less than 20% of its cost, your lender will probably require you to buy insurance from a PMI company prior to signing off on the loan. Although it costs extra, PMI allows buyers who cannot make a significant down payment (or those who choose not to) to obtain financing at affordable rates. 1:55
6 Reasons To Avoid Private Mortgage Insurance
How Not to Pay PMI
One way to avoid paying PMI is to make a down payment that is equal to at least one-fifth of the purchase price of the home; in mortgage-speak, the mortgage's loan-to-value (LTV) ratio is 80%. If your new home costs $180,000, for example, you would need to put down at least $36,000 to avoid paying PMI.