Is it better to put 20% down to avoid PMI?

Not always. PMI typically costs 0.3-1.5% of the loan amount annually and cancels at 78% LTV. If the extra cash needed to reach 20% could earn more invested (historically 7-10% annually in the stock market), keeping a lower down payment and paying PMI may build more total wealth over time.

When does PMI drop off automatically?

Under the Homeowners Protection Act, PMI automatically cancels when your loan balance reaches 78% of the original purchase price — not the current appraised value. You can request cancellation at 80% LTV. For a $400,000 home, automatic cancellation occurs at a loan balance of $312,000.

How much does PMI cost per month?

PMI typically costs 0.5-1% of the loan amount per year, or roughly $100-$300/month on a $400,000 home with 10% down. The exact rate depends on your credit score, loan-to-value ratio, and loan type. PMI is not permanent — it cancels once you reach 78% LTV.

PMI Calculator

PMI Calculator: Is Putting 20% Down Worth It?

If you put down less than 20% when buying a home, banks charge you an extra monthly fee called PMI (Private Mortgage Insurance). It protects the bank, not you. The common advice is “save up 20% to avoid it.” But is that actually the best move?

What this tool does: Compares two paths side by side. Path A: buy now with less money down and pay PMI. Path B: wait until you have 20% and skip the fee. It calculates which option leaves you with more money.

What you’ll need: A home price, your down payment percentage, and how long you plan to stay.

The surprising answer: In many cases, buying sooner with less down — even with PMI — builds more wealth than waiting. This tool shows you exactly when that’s true and when it’s not.

Home Price

Mortgage Rate (%)

Credit Score Range

PMI rate used: 0.45%/yr

ZIP Code (optional — shows local appreciation rates)

Your Down Payment: 10%

3.5%Down: $50,000 · Loan: $450,00019.5%

Investment Return (%/yr)

Nominal basis · S&P 500 historical avg: ~10% nominal

How Long You’ll Stay (years)

7 years

PMI Drops Off

Month 112

Automatic cancellation at 78% of original purchase price · Homeowners Protection Act 1998

December 2035 · when balance hits $390,000

Monthly PMI: $169 · Total PMI if you hold to drop-off: $18,900

0.45% of the original loan amount annually · DwellQ estimate for a 720–759 credit score

You said you’ll stay 7 years, so you’d only pay 84 of those 112 months — $14,175 — before selling. The comparison below uses that figure.

10% Down (Your Plan)

Down payment

$50,000

PMI paid over 7 years

$14,175

Monthly P&I on $450,000

$2,919

Extra $50,000 invested at 7%

+$30,289

7% annual return, nominal — compared against nominal PMI and interest dollars

20% Down (No PMI)

Down payment

$100,000

PMI paid over 7 years

$0

Monthly P&I on $400,000

$2,594 ($324/mo less)

Interest avoided over 7 years

+$22,635

Extra cash required

$50,000

The smaller loan pays $324/mo less, but only the interest slice of that is a saving — the rest is principal you’d be paying either way, and it turns into equity.

20% down wins by $6,521

Putting 20% down over 7 years saves $36,810 — $14,175 in PMI plus $22,635 in interest on the smaller loan. At 7% return, investing $50,000 for 7 years only earns $30,289. The bigger down payment is the better move at this return rate.

20% down: $14,175 PMI avoided + $22,635 interest avoided = $36,810
Lower down: $50,000 invested → $30,289 growth

Break-even investment return: 8.3%— above this rate, lower down payment wins

Minimum annual (nominal) return needed for investing the difference to beat the PMI and interest the bigger down payment avoids

Not counted on either side: the equity the smaller loan builds faster (yours whichever path you take, just sooner), closing costs, taxes on investment gains, and home appreciation — which is identical either way, since it’s the same house.

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WHAT TO DO NEXT

Plan your savings target

Whether you wait or buy now, here's exactly how much to save.

Run the full comparison

See how PMI affects the rent-vs-buy math over time.

PMI rates vary by lender, credit score, and LTV. This calculator uses a DwellQ estimate for your credit band (0.45%/yr for 720–759) — your lender’s quote will differ. Investment returns are not guaranteed — past performance does not predict future results.