Private mortgage insurance (PMI) is required on conventional loans when you put less than 20% down. In Bethesda’s market, where 20% means $240,000 or more, that line item can run $450–$900 per month. Four strategies can help you avoid it: putting 20% down, using an 80-10-10 piggyback loan, choosing lender-paid PMI, or using a VA loan if you qualify. If you’re already paying PMI, federal law requires cancellation once you reach 20% equity — and appreciation in this market may get you there faster than your amortization schedule suggests.
Can you avoid PMI when buying a home in Bethesda, MD without putting 20% down?
Yes — and there are several ways to do it. Private mortgage insurance (PMI) is required on conventional loans when your down payment is less than 20%, but four strategies can eliminate it: putting 20% down on your Bethesda purchase, using an 80-10-10 piggyback loan structure, choosing a lender-paid PMI program, or using a VA loan if you qualify. Each approach has different tradeoffs depending on your down payment, credit profile, and how long you plan to stay in the home.
By Pey Behin | May 17, 2026
In Bethesda’s market, the conversation about PMI usually starts the same way: a buyer runs a down payment scenario with their lender, sees the monthly payment number, and asks “what’s that extra line item?”
That line item is private mortgage insurance. On a typical Bethesda purchase, it runs between $450 and $900 per month. Over three to five years — a realistic window before you hit the equity threshold to cancel it — that’s $16,200 to $54,000 in insurance premiums that don’t go toward your principal.
The good news: PMI isn’t inevitable. There are several ways to avoid it entirely, and a few more ways to get rid of it faster if you’re already paying it.
What PMI Is (and Isn’t)
Private mortgage insurance protects the lender — not you — if you default on the loan. It’s required on conventional loans when your down payment is below 20%. The cost is typically 0.5%–1.5% of your loan amount per year, depending on your credit score, down payment size, and the lender.
On a $1.08M loan (10% down on a $1.2M home), that works out to:
- At 0.5%: ~$450/month
- At 0.8%: ~$720/month
- At 1.0%: ~$900/month
None of that builds equity. It’s a cost of borrowing with less than 20% down — and it continues until you reach 20% equity in the home.
Strategy 1: Put 20% Down
The cleanest way to avoid PMI is to bring 20% to the table at closing. On a $1.2M home — roughly the Bethesda median — that’s $240,000 down.
This is a significant cash commitment, and many buyers in this market are working with strong income but haven’t accumulated $240K in liquid savings alongside closing costs and reserves. That’s where the other strategies come in.
One thing to note: higher down payments in Bethesda’s market don’t always come entirely from savings. Some buyers roll equity from a previous home sale, use a family gift, or time a bonus or stock liquidity event. If you’re in that position, 20% is the path of least resistance.
Strategy 2: The 80-10-10 Piggyback Loan
This is the most commonly used alternative when 20% down isn’t on the table. Here’s how it works:
- First mortgage: 80% of the purchase price
- Second mortgage (home equity loan): 10% of the purchase price
- Your down payment: 10%
Because the primary mortgage covers exactly 80% of the purchase price, it doesn’t trigger PMI. The second loan fills the remaining gap at a separate interest rate — typically higher than the first mortgage and often variable.
On a $1.2M home:
- First mortgage: $960,000 (80%)
- Second mortgage: $120,000 (10%)
- Down payment: $120,000 (10%)
There are tradeoffs. The second mortgage carries its own rate — usually prime-plus — and you’re managing two loans instead of one. But in many scenarios, especially for buyers with strong credit who plan to pay down the second loan quickly, the math works out ahead of paying PMI.
One meaningful advantage in Montgomery County: the 2026 conforming loan limit is $1,209,750. That means a first mortgage of $960,000 sits comfortably within conforming territory — you’re avoiding both PMI and jumbo loan pricing in a single structure. That’s a real win in Bethesda’s price range.
Strategy 3: Lender-Paid PMI (LPMI)
Some lenders offer to cover your PMI cost in exchange for a slightly higher interest rate — typically 0.25%–0.5% above what you’d otherwise qualify for.
The appeal is obvious: no monthly PMI line item on your statement. The catch is equally clear: the higher rate is permanent. Unlike borrower-paid PMI, you can’t cancel LPMI when you reach 20% equity. That higher rate stays for the life of the loan unless you refinance.
LPMI tends to make sense for buyers who plan to sell within 5–7 years (before the accumulated rate cost surpasses what PMI would have cost), or who prefer the simplicity of a single monthly payment over tracking PMI removal milestones.
It’s worth running the breakeven calculation with your lender. How many months of LPMI’s higher rate does it take to cost more than borrower-paid PMI’s monthly premiums would have? That number determines which option is cheaper for your situation and timeline.
Strategy 4: VA Loan — No PMI, No Down Payment Required
If you’ve served in the military, a VA loan eliminates the PMI question entirely. VA loans require no down payment and no private mortgage insurance — ever. The funding fee that VA loans do charge is a one-time cost, and veterans with a service-connected disability rating are often exempt from it entirely.
On a $1.2M Bethesda purchase, a qualifying veteran using a VA loan to buy in Bethesda would avoid both the $120,000–$240,000 down payment threshold and the $450–$900/month in PMI. The savings over five years can easily exceed $50,000.
Bethesda has a significant population of active-duty and veteran military families — many of them buyers in exactly this price range. If you qualify, this conversation should happen before any other financing discussion.
Canceling PMI After Closing
If you’ve already purchased with PMI — or you buy with less than 20% down and can’t use one of the above strategies — you’re not locked in forever.
The Homeowners Protection Act governs PMI removal on conventional loans:
- Request cancellation at 80% LTV. Once your loan balance drops to 80% of the home’s original purchase price, you can formally ask your servicer to cancel PMI. You’ll typically need to be current on payments and may need a new appraisal.
- Automatic cancellation at 78% LTV. Federal law requires your servicer to cancel PMI automatically when your loan balance reaches 78% of the original purchase price, as long as you’re current.
- Appraisal-based early cancellation. If your home has appreciated significantly, you may be able to show that current market value is higher than when you bought — lowering your effective LTV sooner than your payment schedule would suggest. Most servicers require 12–24 months of payment history for this path.
In Bethesda’s market, where the 2026 Montgomery County reassessment showed a 12.2% increase in property values, some buyers have built equity faster than their amortization schedule projected. That can accelerate PMI removal meaningfully.
A Note on FHA Loans
If you’re considering an FHA loan, mortgage insurance works differently — and it’s harder to remove.
FHA loans use a mortgage insurance premium (MIP), not PMI. If you put less than 10% down on an FHA loan, MIP is required for the life of the loan regardless of how much equity you build. The only way out is a refinance to a conventional loan.
This is one of the key reasons many buyers in Bethesda ultimately choose conventional financing — even when they qualify for both. For a full breakdown of how FHA and conventional loans compare for Bethesda buyers, that post covers the MIP vs. PMI distinction in detail.
The Right Strategy Depends on Your Numbers
Which of these approaches makes sense for you depends on your down payment, credit score, how long you plan to own the home, and what rates look like when you lock.
What I walk my buyers through before they decide is a simple side-by-side: what does PMI actually cost over your expected ownership window? What does each alternative actually cost over that same window? The gap between those numbers drives the decision — not which option sounds better in the abstract.
Understanding the full picture of what buying in Bethesda actually costs — including PMI, closing costs, and ongoing carrying costs — is the starting point. If you want to run through the numbers for your specific situation before you commit to a loan structure, that’s exactly the kind of conversation I have with buyers early in the process.
Frequently Asked Questions
What is PMI and when is it required in Maryland?
Private mortgage insurance is required on conventional loans in Maryland when your down payment is less than 20% of the purchase price. It protects the lender — not you — in the event of default. In Bethesda, where median home prices are around $1.2M, that means PMI kicks in for buyers putting down less than $240,000.
How much does PMI cost on a Bethesda-area home purchase?
PMI on a conventional loan typically runs 0.5%–1.5% of your loan amount per year, depending on credit score and LTV. On a $1.08M loan (10% down on a $1.2M home), that’s roughly $450–$900 per month. The exact rate varies by lender and your credit profile.
Can you avoid PMI with less than 20% down in Maryland?
Yes. The most common approach in Bethesda’s price range is an 80-10-10 piggyback loan — a first mortgage at 80% of the purchase price, a second mortgage at 10%, and a 10% down payment. Because the primary loan stays at 80% LTV, PMI is not required. VA loans also eliminate PMI entirely for qualifying veterans, regardless of down payment amount.
When can you cancel PMI on a Maryland home loan?
You can formally request PMI cancellation once your loan balance reaches 80% of the home’s original purchase price. Federal law requires automatic cancellation at 78% LTV. If your home has appreciated significantly, you may qualify for early removal through a new appraisal — a path worth exploring in a market where Bethesda and Montgomery County values have risen steadily.
Is PMI the same as FHA mortgage insurance?
No. PMI applies to conventional loans. FHA loans use a mortgage insurance premium (MIP), which operates under different rules. Critically, FHA borrowers who put less than 10% down are required to pay MIP for the life of the loan — it doesn’t automatically cancel at 80% LTV like PMI does. The only exit is refinancing into a conventional loan.
Avoiding PMI is one of those decisions that looks small on a monthly basis but adds up to real money over a full ownership window. In Bethesda’s market, where home prices make every line item significant, it’s worth spending time with your lender running the actual numbers across your options before you lock into a loan structure.
That’s a conversation I have with buyers early — before we write an offer — so there are no surprises at the closing table. If you want to run through it for your situation, reach out anytime.
About Pey Behin
Pey Behin is a residential real estate agent serving the Washington, DC metro area, with a focus on Bethesda, Montgomery County, and Northern Virginia. He works with buyers and sellers who want clear strategy, data-driven pricing, and direct guidance throughout the transaction process. His approach combines market analytics, negotiation expertise, and modern marketing to position clients effectively in competitive conditions.
