Putting 20% Down Just to Avoid PMI? Do the Math First.

A lot of homebuyers think 20% down is the “smart” number.

Anything less means paying PMI, and PMI, they’ve been told, is throwing money away.

But that advice skips the real tradeoff.

On a $500,000 home, the difference between 10% and 20% down is $50,000 more out of pocket on day one.

The question that actually matters isn’t:

“How do I avoid PMI?”

It’s:

“What am I getting for that extra $50,000?”

First, What Is PMI?

Private mortgage insurance, or PMI, may be required on a conventional loan when you put less than 20% down.

One important clarification:

PMI protects the lender, not you.

It reduces the lender’s risk when a borrower makes a smaller down payment.

The borrower pays for that protection.

PMI costs money.

That doesn’t automatically make it a bad tradeoff.

$500,000 Home: 10% Down vs. 20% Down

Let’s put real numbers around the decision.

For illustration, we’ll use 7.03%, the national average 30-year fixed mortgage rate reported by Freddie Mac on September 24, 2026. An individual borrower’s actual rate and loan pricing may be different.

Illustrative example only. Principal and interest calculations use the same 7.03% interest rate for both scenarios. Example excludes property taxes, homeowners insurance, HOA dues, closing costs, prepaid expenses, and any differences in interest rate or loan pricing that may exist between the two structures.

The extra $50,000 does real work.

It lowers the loan amount.

It reduces the monthly principal and interest.

And with 20% down on a conventional loan, PMI typically isn’t required.

But it also converts another $50,000 of your liquid cash into home equity.

That matters too.

PMI Has a Cost. So Does Using More Cash.

This is the part I don’t want buyers skipping.

Just because you can put 20% down doesn’t automatically mean you should.

That additional $50,000 might also need to cover:

• Closing costs

• Moving expenses

• Initial repairs or furnishings

• An emergency fund

• Or simply the ability to close without feeling cash-poor the next day

Avoiding PMI is one goal.

Preserving liquidity is another.

Neither automatically wins.

The numbers decide.

PMI May Be Temporary

This is another misconception worth clearing up.

For many mortgages covered by the federal Homeowners Protection Act, a borrower can generally request PMI cancellation when the principal balance reaches or is scheduled to reach 80% of the home’s original value.

Cancellation isn’t automatic at 80%. Requirements can include a written request, a good payment history, being current on the mortgage, and satisfying other conditions.

PMI generally automatically terminates when the mortgage is scheduled to reach 78% of the home’s original value, provided the borrower is current. Different rules and exceptions can apply.

Now let’s apply the scheduled amortization to our example.

For the $450,000 loan at 7.03%:

• The scheduled balance reaches 80% of the original $500,000 value at approximately 8 years and 5 months

• The scheduled balance reaches 78% at approximately 9 years and 8 months

Those dates illustrate the scheduled amortization of this specific example. They are not a guarantee of when PMI would actually be removed from a particular borrower’s loan.

But the larger point matters:

PMI may not be permanent.

And the payment difference deserves context too. In this example, borrowing the extra $50,000 with 10% down adds about $334 per month in principal and interest alone. Any PMI that applies would be in addition to that.

That’s why this isn’t simply a choice between “pay PMI” or “save money.”

You’re comparing the cost of borrowing more and potentially paying PMI with the value of keeping $50,000 more of your cash available after closing.

Don’t Compare Only the PMI

If we’re comparing 10% down with 20% down, I don’t want to look at one line item.

I want the whole picture.

• How much additional cash does 20% require?

• How much does the principal and interest payment change?

• What would PMI actually cost for your specific scenario?

• Does the interest rate or loan pricing change between the options?

• How much cash remains after closing?

• What are the PMI cancellation rules for your specific loan?

• What else do you need your cash to accomplish?

That is the comparison that matters.

Before You Put 20% Down, Run This Checklist

Ask:

• How much would PMI actually cost me?

• How much would another 5% or 10% down reduce my payment?

• Does the interest rate or pricing change between the options?

• How much additional cash would I bring to closing?

• How much money would I have left afterward?

• What are the PMI cancellation rules for my specific loan?

Don’t make a $50,000 decision solely to eliminate a line item until you know what that line item actually costs and how long it may last.

The Better Question

Stop asking:

“How do I avoid PMI?”

Start asking:

“Is avoiding PMI the best use of my next dollar?”

Sometimes putting 20% down may make sense.

Sometimes keeping more cash available may matter more.

The goal isn’t to love PMI.

The goal is to price the tradeoff.

Would you rather put more money down to eliminate PMI, or keep more money in the bank if the numbers made sense?

Tell me in the comments.

If you’re deciding how much to put down, I can run your options side by side, down payment, monthly payment, PMI, loan costs, and cash remaining after closing, so you can see the difference before you decide.

Schedule a Mortgage Strategy Call

Disclaimer

Information is for educational purposes only and is not a commitment to lend or financial advice. The $500,000 example and 7.03% interest rate are illustrative and do not represent an offer or available loan terms. The 7.03% figure reflects Freddie Mac’s national average 30-year fixed mortgage rate reported September 24, 2026; individual rates and pricing vary. PMI requirements, premiums, cancellation eligibility, interest rates, loan pricing, and payment amounts vary by borrower, property, loan program, lender, and mortgage insurer. PMI cancellation and termination requirements vary based on the loan and applicable requirements. All loans are subject to credit approval, program guidelines, property eligibility, and underwriting requirements.