Paying PMI Upfront vs. Monthly: Which is Better?
Can you pay PMI upfront? Yes, you can choose to pay 100% of your private mortgage insurance (PMI) premium upfront in a lump sum — but is that the best option for you?
Deciding whether to pay PMI upfront or monthly depends largely on whether you have the financial cushion to add another expense to your closing costs. Simply put, paying PMI upfront means you’ll have a lower monthly mortgage payment; in contrast, paying it monthly keeps a chunk of your cash savings intact for future maintenance, repairs or emergencies.
Overview: The 4 ways you can make PMI payments
A down payment of less than 20% on a conventional loan typically comes with the extra expense of private mortgage insurance (PMI) to cover the lender’s risk, should you default. Most lenders offer four different ways to make PMI payments:
| PMI payment option | How it’s paid | Key benefit | Key drawback |
|---|---|---|---|
| Monthly premium | In monthly installments as part of your monthly mortgage payment | Doesn’t cost you anything upfront, and the premium amount will decrease over time | You’ll have a higher monthly mortgage payment |
| Upfront (single) premium | You pay the entire amount at closing in one lump sum | Your monthly mortgage payments will be lower, since they won’t include PMI | You’ll need to bring more cash to closing and consider your break-even point |
| Lender-paid premium | You make no PMI payments, but agree to a higher mortgage interest rate in exchange | You’ll bring less cash to the closing table than if you paid the PMI upfront yourself | You’ll have to take on a higher interest rate, which means increased loan costs overall |
| Split premium | You’ll pay a portion at closing in a lump sum, and the rest via monthly mortgage payments | You’ll pay a smaller PMI premium than if you went with the monthly option | You’ll have to bring more cash to closing than if you just paid your PMI monthly |
How to decide if you should pay PMI upfront or monthly
When deciding which PMI payment method to choose, consider these key factors:
- Your available cash at closing: Calculate whether you can comfortably cover your down payment, closing costs and PMI premium while also managing your other financial priorities. Make sure that paying PMI upfront won’t prevent you from funding important goals like retirement savings, maintaining an adequate emergency fund or covering anticipated home maintenance and repairs.
- Break-even analysis: Calculate your break-even point for upfront PMI. For example, if the upfront premium is $2,000 and monthly PMI would be $100, you need to stay in the home at least 20 months to recoup the upfront cost. If you might sell or refinance sooner, monthly PMI is the better financial choice since you won’t pay any more PMI than you have to.
- Your credit scores: Credit scores play a big role in determining your PMI premium — so if you have high credit scores (ideally 740-plus), your monthly PMI rate will likely be low. This can make monthly payments a smart choice, even with a minimum down payment.
- Interest rate trade-offs: Remember that lender-paid PMI means accepting a higher interest rate over the entire life of your loan, making it typically the most expensive option overall.
- Seller concessions: If the seller is paying a percentage of your closing costs, you can apply this credit toward an upfront PMI premium — essentially having the seller cover your PMI.
Learn more about the nine factors that determine how expensive your PMI will be.
Cost comparison: Paying PMI upfront vs. monthly
It’s typical to pay 0.3% to 1.5% of your loan amount annually in PMI (the exact amount depends on your financial profile).
As an example, let’s say you want to purchase a $400,000 home with a 3% down payment. Here’s how your PMI options might look:
| Upfront PMI | Monthly PMI | |
|---|---|---|
| Cost at closing | $37,539 | $0.00 |
| Monthly cost | $0.00 | $291 |
| Monthly mortgage payment amount | $2,376 | $2,667 |
| Overall cost of PMI | $37,539 | $37,539 |
Takeaway: You’ll pay the same amount in total PMI no matter what, but you can choose where you’d like to distribute the burden. A big tab at closing comes with lower monthly payments, while in comparison paying nothing at closing increases your payments by $291 per month.
Pros and cons of paying PMI upfront
Pros
- Your PMI cost is paid in full at closing. You only pay upfront PMI once, which means you won’t have any ongoing monthly mortgage insurance costs.
- You’ll end up with a lower monthly payment. With your entire PMI premium paid at closing, your monthly housing expense will be lower.
- You won’t need to cancel PMI later. Borrowers who choose to pay PMI upfront don’t have to worry about requesting a PMI cancellation letter.
- You can get a tax benefit for the extra expense. As of 2026, tax law allows you to write off upfront PMI premiums using the home mortgage interest deduction.
Cons
- You’ll spend more money at closing. Upfront PMI is added to your total closing costs, which could clean out your savings.
- You could lose money if you sell or refi too soon. If you need to sell due to a job loss or financial emergency before reaching your break-even point, you won’t get a refund on upfront PMI — meaning you’ll lose money compared to if you had paid monthly.
Pros and cons of paying PMI monthly
Pros
- You’ll leave more cash in the bank. Homeowners should set aside 1% to 4% of their home’s value to cover annual home maintenance and repairs. Paying PMI monthly instead of upfront leaves more room in your budget to save.
- Your total closing costs will be lower. No upfront premium means you’ll write a smaller check at closing, and can spread out the cost as part of your monthly payments over time, instead of paying all at once.
Cons
- Your monthly payment will be higher. Monthly mortgage insurance could mean a slightly tighter monthly budget.
- You’ll have to refinance or request cancellation to get rid of it. Opting for monthly PMI means you’ll have to request PMI cancellation, wait for it to automatically drop off once your loan-to-value (LTV) ratio hits 78% or refinance your mortgage once a home appraisal confirms you have at least 20% equity.
How to avoid paying PMI with a piggyback loan
If you find it challenging to save up for a 20% down payment but are adamant about not paying mortgage insurance, a piggyback loan may be a good alternative. It involves taking out a first mortgage up to 80% of your home’s value, and then “piggybacking” a home equity loan or home equity line of credit (HELOC) on top of it. Here’s how it often works:
- Borrow 80% of your home’s value with a first mortgage
- Borrow 10% of the home’s value with a home equity loan or HELOC
- Make a 10% down payment with your own funds
This particular example is also known as an 80-10-10 loan. And if you’re buying your home, there’s an added bonus: The interest on both mortgages is usually tax-deductible.
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