I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. Call (800) 239-1103.
What Is PMI and How Do You Avoid It on a California Home Loan?
PMI — Private Mortgage Insurance — adds $100–$400/month to California mortgage payments. Here’s exactly what it is, when it applies, and five strategies to avoid or eliminate it.
What Is PMI?
PMI is insurance that protects the lender (not you) if you default on a conventional mortgage with less than 20% down. The cost: typically 0.5–1.5% of the loan amount annually, charged monthly. On a $900,000 California mortgage, PMI runs approximately $375–$1,125/month.
When Does PMI Apply?
PMI is required on conventional loans with less than 20% down payment. FHA loans have their own mortgage insurance (MIP) which works differently — see our FHA vs. conventional article. VA loans have no PMI regardless of down payment. USDA loans have a guarantee fee but no traditional PMI.
How to Avoid PMI: 5 Strategies
1. Put 20% down. The simplest solution. On a $1.2M Marin County home, that’s $240,000. If you have it, this avoids PMI entirely and gets you the best conventional rates.
2. Piggyback loan (80/10/10). Get an 80% first mortgage + 10% second mortgage (HELOC or second mortgage), put 10% down. No PMI because the first mortgage is exactly 80% LTV. The second mortgage has a higher rate, but total cost is often less than PMI — especially on California loan amounts.
3. Lender-paid PMI (LPMI). The lender pays your PMI in exchange for a higher interest rate. Best when you plan to sell or refinance before you’d otherwise cancel PMI naturally. Note: LPMI can’t be cancelled — it’s baked into the rate permanently.
4. Single-premium PMI. Pay the entire PMI premium upfront at closing (typically 1.5–3% of loan amount). Makes sense if you have cash and plan to keep the loan 5+ years.
5. VA loan. If you or your spouse is a qualifying veteran, VA loans have zero PMI and zero down payment. The most powerful mortgage benefit available in California’s market.
When Does PMI Cancel?
For conventional loans, PMI cancels automatically when your loan balance reaches 78% of the original purchase price (based on your amortization schedule). You can request cancellation at 80% LTV — with a new appraisal showing 20% equity based on current market value. In California markets where appreciation is strong, many buyers hit 80% equity much faster than the amortization schedule would suggest — making the appraisal-based request worth pursuing.
Frequently Asked Questions
How much is PMI on a California home loan?
PMI on a conventional California mortgage typically costs 0.5–1.5% of the loan amount annually, paid monthly. The exact rate depends on your credit score, LTV, and the PMI provider. On an $800,000 loan at 0.7% PMI, that’s $5,600/year or about $467/month. PMI rates are lower for borrowers with higher credit scores and higher down payments (e.g., 15% down vs. 5% down). Your lender is required to provide the PMI rate in your Loan Estimate.
Can I get rid of PMI early in California if my home value goes up?
Yes. Federal law (Homeowners Protection Act) allows you to request PMI cancellation when your loan balance reaches 80% of the original purchase price. But if your home has appreciated, you can request cancellation based on current market value — which requires ordering a new appraisal (typically $600–$1,000). If the appraisal confirms 20% or more equity, most lenders will remove PMI. In California’s coastal markets where appreciation can be rapid, this is often worth pursuing 2–3 years after purchase.
Is it better to put 20% down to avoid PMI or invest the difference?
This is a real financial planning question with no universal answer. If putting 20% down depletes your liquid savings, having PMI and keeping reserves is often the better choice — liquidity matters in California’s high-cost environment where unexpected repairs, HOA assessments, or income gaps can arise. If you have ample savings beyond the down payment, avoiding PMI by hitting 20% is straightforward math: the PMI cost vs. the investment return on that capital. I can run the comparison for your specific numbers.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | Licensed since 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
