This “Renovation Hack” to Drop PMI Sounds Smart—But Here’s the Catch Homeowners Miss

The collision of high home prices and high mortgage rates has made homebuying very difficult for many Americans over the past few years. In fact, 66% of Gen Z and 59% of Millennials worry about affording a home in the future, according to a NeighborWorks America survey. 

One trending affordability hack is putting down less than the 20% typically needed to avoid private mortgage insurance (PMI), quickly followed by making renovations to then qualify for PMI removal. Here’s the catch: renovations don’t automatically boost your home value nor get you out of PMI. If your lender-approved appraiser disagrees on the value of the improvements, you might be stuck with the cost of those renovations while still paying PMI.

Why Homeowners Are Desperate to Get Rid of PMI

The smaller your down payment when buying a home, the larger your mortgage amount and therefore payments. And when you have to carry PMI due to putting down less than 20%, that makes your housing cost even more.

Typically, PMI adds about $30-$70 per month for every $100,000 borrowed. The average starter home costs $362,800, according to National Association of Realtors data. So, if you put down 5%, that would result in a mortgage balance of $344,660, and your PMI would then be around $103–$241 per month.

While that might be a relatively small portion of your total housing payment, it still makes a dent in your monthly budget. If you could instead put that extra money into savings every month, you could accumulate more than $1,200 in a year, or even approach $3,000. That could be a good start for your emergency fund, or it might pay for a relatively modest vacation.

Instead, PMI feels like money going nowhere, and is why homeowners are increasingly drawn to strategies that promise to make it disappear faster than simply waiting for their loan balance to shrink.

The Renovation Trick Going Viral—and Why It Sounds So Convincing

There’s a trending hack that involves buying your house with just 5% down (even if you have more), carrying PMI initially, and then making renovations to increase your home equity enough to get rid of PMI.

Let’s say you’re buying a house that costs $400,000. Instead of putting down $80,000 initially to reach the 20% equity threshold to avoid PMI, you could:

1. Make a $20,000 down payment.
2. Since the down payment is only 5%, you’d pay PMI. Even if you did so for a year, you probably wouldn’t pay much more than $3,000 in this scenario.
3. Put $50,000 into renovating your kitchen. That plus the year of PMI and down payment still total less than the $80,000 that would have been required to reach 20% equity.
4. Get your house re-appraised, with the renovations boosting your home’s value enough to then request that your lender drop PMI.

This sounds so convincing because renovations do often improve home values, albeit not as much as you might think. You also might have heard of people recently getting out of PMI due to rising home prices. And who wouldn’t want to put their money toward renovating their home instead of giving it to a lender as a down payment?

Unfortunately, this hack isn’t easy to pull off.

Why Renovations Don’t Automatically Remove PMI

There’s a few holes in this hack. First, there’s no guarantee that renovations will increase your equity enough to drop PMI.

Even though home renovation shows often highlight dramatic value jumps, many real-world upgrades fail to deliver a positive ROI. On average, homeowners get back about 70% of what they spend, according to RenoFi. That means a $50,000 renovation could raise a home’s value by just $35,000.

So, for that hypothetical $400,000 home, the extra $35,000 in home value plus the $20,000 you put down initially would bring your home equity to $55,000, which is about 12.6% of the now $435,000 home.

To get to 20%, you’d need $50,000 in renovations to bring the home’s value up to $475,000. That would be a 150% ROI on your renovations—far from a sure thing.

In addition, this all depends on how a lender-approved appraiser calculates your home’s value after the renovations. A contractor might tell you one thing about expected value, but if the appraisal doesn’t agree, you’re out of luck. 

What Actually Works If You Want to Drop PMI Faster

If you’re intent on dropping PMI quickly, the most reliable way to do it is by paying down your mortgage principal. Anything above your lender-required payment goes directly toward your principal balance, which increases your home equity dollar for dollar.

Beyond extra payments, a few other strategies can help—though they’re less predictable and come with trade-offs.

You might still face seasoning requirements on your current loan, but refinancing can reset the clock. A new loan typically comes with a new appraisal and new PMI rules, which may allow PMI to be removed sooner if your equity qualifies. Refinancing does add costs, though falling mortgage rates could help offset them.

Rising home prices can also increase your equity enough to drop PMI, particularly after a refinance. But this is largely outside your control and depends on broader market conditions.

If you’re still early in the buying process, another option is to simply delay your home purchase. Saving enough for a 20% down payment can allow you to avoid PMI altogether, rather than trying to remove it later.