PMI

Understanding PMI: How to Avoid It and Save Money on Your Home Loan

Learn how to avoid PMI and save on your mortgage costs with these practical tips.

Richard Walker

14 Aug 2025 — 2 min read

Cartoon illustration of a person avoiding high PMI costs.

Let's face it, buying a home can be overwhelming. But there's one daunting term that many new homebuyers stumble upon: PMI, or Private Mortgage Insurance. If you've heard about it but aren't quite sure what it means or how to dodge it, you're in the right place.

What is PMI, Anyway?

When you're buying a house, if you can't put down at least 20% of the home's purchase price, lenders typically require you to pay PMI. It's a way to protect the lender in case you default on the loan, but unfortunately, it doesn't benefit you, the borrower. So, how can we keep more of our hard-earned money in our pockets?

Ways to Avoid PMI

Here's the good news: there are several strategies to dodge PMI, and most are simpler than you might think.

Put down 20%: This is the magic number that lets you skip PMI altogether. But, if saving up that amount seems impossible, don't worry; there are other tactics.
Consider a piggyback loan: Also known as an 80-10-10 loan, this involves taking out two loans: an 80% first mortgage and a 10% second mortgage, plus a 10% down payment from you.
Look into Lender-Paid PMI: Some lenders offer options where they pay the PMI, usually in exchange for a higher interest rate. Depending on your situation, this could still save you money over time.
Improve your credit score: A better credit score can mean better interest rates and sometimes even leverage to negotiate PMI terms with lenders.

A checklist titled 'Home Purchase', including items like budget, savings, credit score, and avoiding PMI, depicted in a cartoon style.

A Real-World Anecdote

Picture this: my friend Lisa had been saving for her dream home for over a decade. She was ecstatic when the time came to buy, but when her mortgage officer mentioned PMI, it threw her dream into a tailspin. Instead of panicking, Lisa worked on boosting her credit and managed to put down 20%, successfully skipping PMI and saving money in the long run.

A cartoon-style image of a computer screen displaying a mortgage calculator with numbers and graphs, surrounded by dollar signs.

The Takeaway

Although PMI can initially seem like an unavoidable pain, there are practical steps you can take to avoid it. Whether it's saving for a larger down payment, improving your credit score, or opting for a piggyback loan, you have options. And as we all know, in the world of home buying, every little bit of saving helps. So, are you ready to wave goodbye to PMI and hello to smarter savings?