$400,000 home: 10% versus 20% down
10% down loan: $360,000
20% down loan: $320,000
Illustrative PMI at 0.6%: $2,160/year
Extra $40,000 borrowed also earns mortgage interest
Smaller down payment retains $40,000 of liquidity
Read the sequence from the starting balance through the trigger or exit date.
Follow the decision over time
Premium basis
PMI pricing depends on loan-to-value, credit, product and insurer. Use the quote rather than a generic percentage for the final decision.
Cancellation paths
Borrower-requested cancellation, automatic termination and lender rules can use different balance or value tests. Improvements and appreciation may require evidence or seasoning.
This decision belongs in The Real Cost of a Mortgage. Use Mortgage Closing Costs: Sort Loan Charges From Prepaids to check the next assumption, then test the numbers in the Homeownership Cost Calculator.
Compare cash uses
A larger down payment reduces balance and may remove PMI, but it also reduces reserves. Include the value of an emergency fund without inventing an investment return.
Do not confuse insurance beneficiary
PMI generally protects the lender against borrower default; it is not homeowner life or payment protection.
Build the decision timeline
Mortgage insurance can reduce cash needed upfront while adding a monthly cost. Compare the smaller down payment with cancellation rules, equity growth and the liquidity you preserve.
Evidence for the insurance timeline
- Monthly premium and whether any amount is paid upfront.
- Cancellation and automatic-termination rules for the loan.
- Amortization balance and realistic value assumptions over time.
- Get the actual monthly or upfront PMI quote.
- Calculate payment and interest for both down payments.
- Identify contractual cancellation milestones.
- Preserve a minimum cash reserve in both scenarios.
- Recheck cancellation eligibility as the balance falls.
Timing risks that change the cost
- Assuming PMI lasts for the entire mortgage.
- Assuming appreciation guarantees immediate cancellation.
- Comparing only monthly premium and not the larger loan.
- Using every available dollar for down payment.
Test the dates and balances
Homeownership Cost Calculator
Put the mortgage beside the carrying costs a listing price cannot show.
Questions this decision usually raises
Is mortgage insurance always monthly?
Products can use monthly, upfront or lender-paid structures; lender-paid cost may appear through rate.
Does refinancing remove PMI?
A new loan uses current underwriting, value and closing costs; compare it as a refinance decision.
Is 20% down always optimal?
No. Liquidity, pricing and expected loan life matter alongside PMI.
Verify the dates, triggers and limits
This page explains a calculation, not a personal recommendation. Contract rules and consumer protections vary by product and jurisdiction. Check the current agreement and official guidance before acting.