What Is PMI and Should You Avoid It?
What Is PMI and Should You Avoid It? A Lofty Lender Discussion
When it comes to buying a home, one of the most misunderstood parts of the mortgage process is PMI, or Private Mortgage Insurance. In this episode of The Lofty Lender Podcast, Kyle Guldenpfennig (#TallMoneyMan) sits down with mortgage industry expert Charlie Chedester to explain exactly what PMI is, how it works, and—most importantly—whether you should really be trying to avoid it.
Spoiler: the answer might surprise you.
💡 What Is PMI?
PMI stands for Private Mortgage Insurance, and it’s typically required when a homebuyer puts down less than 20% on a conventional loan. It’s insurance that protects the lender in case you stop making your mortgage payments.
As Charlie explains, PMI has come a long way. It used to be expensive—so expensive, in fact, that buyers would go to great lengths to avoid it. But in today’s market, PMI is far more affordable and manageable, especially for buyers with solid credit and low debt-to-income ratios.
🏡 Why Does PMI Exist?
Back in the day, before government-backed entities like Fannie Mae and Freddie Mac, lenders required 20-30% down to offer a mortgage. If you didn’t have that saved, you were out of luck.
PMI opened the doors to millions of Americans, allowing them to become homeowners without saving a full 20% down payment. It was a game-changer—and still is.
🤯 Truth Bomb: Waiting to Save 20% Could Cost You More
Charlie and Kyle dive into the math and mindset. While saving 20% might sound financially smart, you could be missing out on home appreciation and equity growth while you rent and wait.
“It’s not about avoiding PMI at all costs anymore,” says Kyle. “It’s about understanding how it works and using it strategically.”
With home values rising, waiting an extra year or two could mean paying more for the same house, even if you avoid PMI.
⚙️ The Different Types of Mortgage Insurance
Not all mortgage insurance is created equal. Here’s a quick rundown:
Monthly PMI – The most common type; added to your monthly mortgage payment.
Single Premium PMI – One upfront payment instead of monthly payments.
Lender-Paid Mortgage Insurance – The lender pays it, but you take a higher interest rate.
Split-Premium PMI – A hybrid approach; part is paid upfront and part monthly. Rare, but useful in some debt-to-income scenarios.
FHA Mortgage Insurance – Not “private,” but still monthly insurance required regardless of your down payment.
VA Loans – No monthly PMI, but do require a funding fee.
USDA Loans – Also include a form of mortgage insurance, charged annually.
🧠 PMI Is All About Risk
Lenders assess risk by looking at:
Your credit score
Your debt-to-income ratio
Your loan-to-value ratio
The better your financial profile, the cheaper your PMI will be.
And as Kyle points out: “Banks are not in the business of owning homes. They don’t want to foreclose. PMI is simply a layer of protection to keep the whole system moving.”
🔄 How to Get Rid of PMI
If you end up paying PMI, it doesn’t have to last forever.
Here are ways to remove it:
Pay your mortgage down until you reach 20% equity.
Refinance if home values have increased and your equity hits 20%.
Request PMI removal from your loan servicer after several years of appreciation or home upgrades.
And remember—you don’t have to figure it all out alone. That’s where a good lender (hi 👋) comes in.
✅ Action Steps from Kyle & Charlie
Talk to your lender about your PMI options across multiple loan types.
Explore alternatives like FHA, VA, or USDA depending on your qualifications.
Run the numbers to see if it’s smarter to buy now with PMI or wait and risk higher prices.
Know your exit plan – Understand how and when you can remove PMI later.
🧭 Final Thoughts
PMI used to be a scary four-letter word. But today, it’s just another tool in your homeownership toolbox. As long as you understand it and have a strategy, PMI can help you buy a home sooner and start building wealth faster.
And hey, that’s what The Lofty Lender Podcast is all about—real talk, actionable advice, and expert insight to help you make smarter homeownership decisions.
🎧 Listen to the full episode on your favorite podcast platform. Just search: The Lofty Lender with #TallMoneyMan
💬 Got questions? Ready to get started? Visit TeamChedester.com and let’s talk about your goals.
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