PMI typically costs 0.3%–1.5% of the loan per year — $150–$400 a month — and it insures the lender, not you. That sounds like pure waste, and month-to-month it is. But the honest comparison is not "PMI vs nothing," it is "PMI vs your alternative." If a low-down-payment purchase lets you buy a $400,000 home two years sooner in an appreciating market, the equity you build and the rent you stop paying can dwarf a couple of years of PMI.
| PMI is more likely worth it when… | Less likely when… |
|---|---|
| Home prices are rising in your market | Prices are flat or falling |
| Renting the equivalent home costs as much or more | Renting is far cheaper |
| You will cancel early (appreciation/paydown) | You will let it run to automatic termination |
| Waiting means missing the home | You are months from 20% down anyway |
By the original amortization schedule, automatic termination on a typical low-down-payment loan lands somewhere around year 8–11. But that date ignores everything your home gained in value. The current-value cancellation path lets many owners cancel years earlier — the gap between "when it falls off on its own" and "when you could have cancelled" is exactly where the waste lives.
Piling on debt to avoid PMI — a piggyback second at a higher rate, say — often costs more than the PMI it replaces. For many buyers the better play is to take PMI to buy sooner, then cancel at the first legal opportunity using the borrower-request and current-value paths. The discipline that matters is not avoiding PMI; it is not overpaying it.
Month-to-month it benefits the lender, not you. But as a bridge into home equity you would otherwise miss, it can be worth it — provided you cancel as soon as you legally can.
The PMI deduction has expired and been reinstated repeatedly; do not count on it. See how much PMI costs for the real monthly math.
Only if today’s rate beats yours — otherwise cancellation without refinancing is cheaper. See does refinancing remove PMI.