What Is PMI, and How Do I Get Rid of It? (Maybe Don’t)
PMI. Private mortgage insurance. The thing everybody wants rid of.
What if I told you it’s sometimes your best friend?
Don’t be a hater. Before you set out to get rid of PMI, understand what it’s actually doing for you, because for a lot of my clients, it’s the reason they own a home at all.
Ask Mike’s AI — answers instantly, no forms
A short history of needing less money
Follow the arc here, because it’s genuinely remarkable.
There was a time when you had to wait until you had the entire cost of a house in cash before you could buy one. Every dollar. Then mortgages were invented, and suddenly you only needed a substantial chunk of it saved.
Then private mortgage insurance was invented, and the chunk got smaller.
And that’s where we are now. Everyday people buy homes without having to save the traditional amount first. That has been magical, and PMI is the mechanism that made it possible. It’s worth a moment of respect before we start plotting its removal.
How it actually works
It’s simpler than it sounds.
When your down payment is below the traditional benchmark, the lender takes out an insurance policy on the mortgage. That policy protects the lender against a portion of the loan if the borrower defaults.
That’s it. That protection is the thing that makes the smaller down payment possible in the first place. Without it, the loan doesn’t exist and you’re back to saving for another several years.
And here’s what surprises people: for borrowers with good credit, depending on the program, private mortgage insurance can be genuinely inexpensive compared with what it would cost you to come up with a much larger down payment instead.
The question nobody can answer off the top of their head
Let me put the real decision to you.
Would you rather hand over a large lump sum today, or a modest amount each month for the foreseeable future?
Most people have no idea. It’s not a stupid question. It’s a legitimately hard one, and it depends on what that lump sum would otherwise be doing for you, how long you expect to keep the loan, and what else you’re trying to accomplish in the next few years.
That’s where I come in. I can show you the options side by side: with mortgage insurance, without it, and what each one actually costs you over the time you plan to be there. Then you decide, with the numbers in front of you instead of a rule of thumb you half-remember.
So should you get rid of it?
Sometimes, yes. Sometimes it’s the obvious move and we’ll map out exactly how.
But “get rid of PMI” isn’t a goal in itself. It’s one option among several, and chasing it can cost you more than keeping it, if getting rid of it means draining savings you’d rather keep, or waiting two more years to buy while prices move.
Accept it for what it is: a tool. Then decide whether you need the tool.
You need more than a good rate
PMI is a perfect example of why a rate on its own tells you almost nothing.
Two loans with the identical rate can cost you very different amounts depending on how the mortgage insurance is handled. The only way to know which one is right for you is to look at your actual situation and your actual timeline.
That’s not a rate question. That’s a plan.
Common questions
What is PMI?
Private mortgage insurance. When your down payment is below the traditional benchmark, the lender takes out an insurance policy on the mortgage that protects against a portion of the loan if the borrower defaults. That protection is what makes the smaller down payment possible.
Why does PMI exist?
It is the reason everyday people can buy a home without saving the traditional amount first. There was a time you needed the entire cost of a house in cash, then mortgages meant you needed a substantial chunk, and then mortgage insurance made the chunk smaller.
Should I try to get rid of PMI?
Sometimes, and sometimes it is the obvious move. But getting rid of it is not a goal in itself. Chasing it can cost you more than keeping it, if it means draining savings you would rather keep or waiting a couple more years to buy while prices move.
Is PMI expensive?
For borrowers with good credit, and depending on the program, it can be genuinely inexpensive compared with what it would cost you to come up with a much larger down payment instead. Which is better for you depends on your cash, your credit and how long you expect to keep the loan.
Whether mortgage insurance is a good trade depends on your cash, your credit and how long you’ll keep the loan. Ask about your own situation. It’s Mike’s AI, so it’s awake at 11pm, and it collects nothing.
Ask Mike’s AI
Ready for a person?
If you’re weighing a bigger down payment against mortgage insurance, that comparison is worth doing properly.
- Book a time with my team: we’ll compare your options side by side and you choose
- Start an application: if you already know you’re ready to move
- Or call the office on (314) 478-3699
This information is not intended to be an indication of loan qualification, loan approval or a commitment to lend. Other limitations may apply. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without prior notice. All products are subject to credit and property approval. Not all products are available in all states or for all dollar amounts. Fairway is not affiliated with any government agencies.
Mike Swaleh, Area Manager, NMLS #739145. Fairway Independent Mortgage Corporation, NMLS Entity ID #2289. Equal Housing Opportunity.
With it or without it: which is better for you?
The article is the same for everyone. Your numbers aren’t. Ask about your own situation — whatever’s actually on your mind. It answers straight away.
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Why people work with Mike
This information is not intended to be an indication of loan qualification, loan approval or a commitment to lend. Not all customers will qualify. Fairway is not affiliated with any government agencies. Mike Swaleh, Mortgage Advisor, NMLS #739145. Fairway Independent Mortgage Corporation, NMLS Entity ID #2289. Equal Housing Opportunity.
