Is PMI always a ripoff, or does it sometimes make sense mechanically?

Does PMI ever make financial sense?

You're wondering whether private mortgage insurance makes financial sense or if you should always avoid it. PMI protects the lender if you can't make payments, and you pay the premium—but the math on whether PMI works for you depends on your situation.

PMI typically costs 0.2% to 2% of your loan amount annually. The premium gets added to your monthly payment or paid upfront at closing. Many loans let you cancel PMI once you reach 20% equity, either through payments or home value increases.

PMI can make sense when you want to buy sooner rather than save for 20% down. Home prices might rise faster than you can save, and you build equity while living in the home instead of paying rent. PMI also preserves cash for other needs like emergency funds or home improvements. Compare the monthly PMI cost against continued rent payments and potential home price increases. Your loan officer can show you different down payment scenarios with PMI costs, monthly payments, and equity building over time.