PMI Destruction: The Race to 20% Equity

If you bought your home with less than 20% down, you are likely paying Private Mortgage Insurance (PMI).

Most homeowners view PMI as just "part of the bill".

We view it as burning money.

The Problem: Renting Your Own Money

PMI does not protect you. It protects the lender in case you default. You are paying an insurance premium for a policy where the bank is the beneficiary.

Typical PMI costs 0.5% to 1% of your loan amount annually. On a $400,000 loan, that’s $200 to $330 per month vanishing into thin air. That’s not interest; it’s waste.

The Agitation: The "Dead Money" Trap

Unlike interest (which is tax-deductible in some cases) or principal (which builds equity), PMI has zero return.

If you have a mortgage rate of 6% and a PMI rate of 1%, your effective borrowing cost on that top slice of debt is massive.

Getting rid of PMI is often the single highest Return on Investment (ROI) move you can make in personal finance.

The Solution: The "Lump Sum" Sniper

PMI usually auto-terminates when you hit 78% Loan-to-Value (LTV) based on the original appraisal. However, you can request cancellation at 80% LTV.

The strategy: Calculate the exact dollar amount needed to hit 80% LTV today.

Why? Because if you pay $10,000 to remove a $250/month PMI charge, you aren't just saving the mortgage interest (6%); you are saving the $3,000/year insurance cost forever. The ROI on that $10,000 is often 30% or higher.

📱 The Amorti Simulation

Let's find your "PMI Kill Number".

1. Open AmortiApp.
2. Input your Original Loan Amount (e.g., $400,000) and start date.
3. Look at your Current Balance (e.g., $380,000).
4. Calculate your target: $400,000 * 0.80 = $320,000.
5. The Gap: $380,000 - $320,000 = $60,000.

If you have cash, paying that $60,000 eliminates the PMI immediately.

• Savings 1: Mortgage Interest on $60k @ 6% = $3,600/year.
• Savings 2: PMI Cost = $3,000/year.
• Total Benefit: $6,600/year on a $60k investment (11% guaranteed, tax-free return).

Stop renting your risk. Kill the PMI.

Calculate My Equity Gap