Buying a home without a 20% down payment is more common than you might think—especially in today’s housing market where high prices and elevated interest rates make saving for a large down payment challenging. But when you put down less than the traditional 20%, lenders typically require Private Mortgage Insurance (PMI).

PMI protects the lender if you default on the loan, but it comes with a cost. Most homeowners pay $100 to $200 per month, depending on loan size and credit score. That can feel like an annoying extra expense—but here’s the good news:

There’s a simple trick that can help you reduce (or eliminate) PMI sooner than you think.

Let’s break it down.

Why PMI Isn’t the Enemy

PMI often gets a bad reputation because it increases your monthly mortgage payment. But for many buyers, PMI is the key to getting into a home sooner, instead of waiting years to save a large down payment.

Think of PMI as a temporary bridge:
You pay a little extra each month until you build enough equity. And in today’s market, equity is growing much faster than normal.

The Trick: Use Market Appreciation to Make PMI Disappear Faster

PMI doesn’t last forever. It typically goes away once you reach 20% equity in your home.

And here’s the trick:
You don’t need to achieve 20% equity solely by paying down the mortgage. Rising home values can push you to 20% faster.

That means:

• You may only live with PMI for a couple of years

• In some markets, PMI could disappear in under 18 months

• You can request removal—you don’t have to wait for the lender to cancel it automatically

In today’s housing environment—with steady appreciation and shrinking inventory—many buyers are reaching that threshold earlier than expected.

Example: How Fast PMI Can Disappear

Let’s use simple, realistic numbers:

• Purchase price: $450,000

• Down payment: 5% = $22,500

• Loan amount: $427,500

• Monthly PMI: $150

Most lenders remove PMI once your home reaches 78% loan-to-value (LTV) automatically, but you can request early cancellation at 80% LTV.

Now imagine your home appreciates by 5% in the first year:

• New home value: $472,500

• Your equity increases by $22,500 from appreciation alone

• Plus, you’ve been making principal payments

You could reach the 20% equity mark years earlier than expected.

That means:

- Your PMI drops off early
- You save $150+ per month
- Your home becomes more affordable without refinancing

How to Speed Up PMI Removal Even More

Here are smart strategies buyers use:

1. Ask for a New Appraisal Once You Think You’ve Hit 20% Equity

If home values have jumped, a new appraisal can officially verify your equity.

2. Make One or Two Extra Principal Payments per Year

An extra $100–$300 per month can shave months off your PMI timeline.

3. Track Local Market Trends

If inventory is tight and homes in your area are selling fast, appreciation may be working in your favor.

4. Document Home Improvements

Upgrades like new flooring, kitchen improvements, or energy-efficient upgrades can boost your home’s value.

Why This Trick Works Especially Well Today

Today’s real estate market continues to support steady home appreciation due to:

• Low housing inventory

• Strong buyer demand

• Slower, but stable, year-over-year price growth

Even modest value increases can put you in the position to remove PMI sooner than you think.

The Big Takeaway

PMI is not a permanent cost—far from it.
If you’re buying a home with less than 20% down, remember:

PMI is temporary. Your equity is growing. And rising home values can make it disappear early.

By watching your equity, requesting an appraisal at the right time, and making small extra payments, you can save hundreds of dollars per year—and make your mortgage more affordable long-term.

Matt Witte strives to be the best realtor in Andover, MA.

Any questions about real estate, reach out to Matt Witte, Andover Realtor, MA