20% Down vs. PMI — What a Smaller Down Payment Really Costs

by De'Angela Smith

Private mortgage insurance — PMI — is one of the most misunderstood costs in home buying. It isn't protection for you, it isn't a down payment program, and it isn't optional below 20% down on a conventional loan. It's a monthly premium you pay so the lender feels comfortable taking a bigger risk. Here's what it really costs, and why your current home's equity is the cleanest way to avoid it.

The same house, two down payments

Take a $550,000 family home, financed at 6.5% on a 30-year fixed:

Down payment	Loan amount	Monthly P&I	PMI	True monthly cost
$170,000 (about 31%)	$380,000	~$2,402	None	~$2,402
$55,000 (10%)	$495,000	~$3,128	~$200–$400	~$3,330–$3,530

What the table is telling you

The smaller down payment costs roughly $900+ more per month — a bigger loan and a PMI premium on top.
PMI protects the lender, not you. If something goes wrong, the insurance company pays the bank — you've simply paid for the privilege of borrowing more.
PMI can eventually be removed once you build about 20% equity in the new home, but at 10% down that can take years — all while the premium keeps coming out of your account every month.

Your equity is the PMI killer

The equity in your current home is the most affordable 20% down payment you will ever have access to. Roll $170,000 of starter-home equity into the next purchase and you shrink the loan and skip PMI entirely — the same house, for hundreds of dollars less per month.

That's exactly why I lead every move-up conversation with an equity report instead of a listing pitch: the number changes what's possible.

💰Rule of thumb: every dollar of equity you carry forward works twice — it shrinks the loan you need and erases the PMI you'd otherwise pay.

Your next step

Want to see which side of that table you'd be on? I'll run your equity, your target price range, and honest payment math at current rates — free, no obligation.

Call or text: 334-201-1544
Email: deangela@heyleo.com

📊Disclosure: Estimates are based on example assumptions at a 6.5% rate; they are not an appraisal or a loan commitment. Actual values, rates, PMI costs, and payments vary by property, borrower, and lender.