Renovate To Drop PMI Mortgage Hack Has a Catch: Your Lender Doesn’t Have To Buy Your New Valuation

A mortgage hack has been making the rounds with real estate influencers: Don’t put 20% down on your home loan.

Given that it takes seven years for the typical buyer to save for a down payment, it's grabbed viewers' attention. Instead, the post from Main Street Mortgage suggests putting down 5%, carrying private mortgage insurance, then using the leftover cash to invest in value-boosting home improvements.

“New kitchen, bathrooms, whatever makes it worth more,” the post says.

Once those upgrades are done, your house “may now be worth way more. Call your bank and ask to remove the mortgage insurance.”

But the hack doesn’t stop there. Once you drop the PMI, it suggests paying whatever you were spending on PMI toward the principal to pay off your home faster in order to save up to $120,000 on a $500,000 home.

It’s a compelling story, promising to build equity on a shortened timeline. However, according to mortgage experts, it may be too good to be true.

Baked into the math is a common misconception: Home improvements don’t always translate into home value, and even if they do, lender-controlled appraisals and seasoning requirements can leave borrowers stuck with PMI for far longer than they expect.

The core constraint: PMI removal isn’t automatic

The viral advice assumes that a homeowner can renovate themselves to a higher loan-to-value ratio. However, in reality, PMI is not something you can drop just because you’ve put money into the property.

“This strategy works in theory but fails in practice far more often than it succeeds,” says Cody Schuiteboer, president and CEO of Best Interest Financial, a mortgage solutions company. 

He points to one main reason: PMI removal isn’t automatic. For conventional borrowers, there are generally three ways PMI goes away.

The first is the slowest and most predictable: scheduled paydown. 

As you make your normal monthly payments, your loan balance gradually falls. PMI can typically be removed once you reach about 80% loan-to-value (LTV). On a 30-year mortgage, that can take years unless you’re making extra principal payments from the start.

The second is appreciation-based removal, which is what the renovation hack is trying to capitalize on.

Here, you’re asking the lender to recognize that the home is worth more because the market rose, you improved the property, or both. That means your LTV is effectively lower, even if your loan balance hasn’t changed much. 

The catch here is that lenders usually require you to own the home for a minimum time period (usually two to five years, according to Fannie Mae’s guidelines) before they’ll consider this route. Plus, they’ll need a lender-approved appraisal—not contractor estimates, receipts, or a before-and-after slide show. If the appraisal comes in lower than you expect, you may still be above the LTV threshold.

The third path is refinancing into a new loan without PMI, typically because your home value rose, your balance dropped, your credit improved, or all three. But refinance math is market-rate dependent, and if current rates are higher than your existing rate, dropping PMI might not offset the larger interest cost.

When the hack backfires

With so many avenues to take a wrong turn, Schuiteboer says he’s seen borrowers invest tens of thousands of dollars thinking they’d be able to drop their PMI, only to find they’re still above the LTV threshold.

In 2022, Schuiteboer worked with a client who bought a home for $450,000 with 5% down and planned to remove PMI within about 18 months by renovating. She put roughly $65,000 into improvements. But when the lender appraisal came back, her home’s value had risen only $35,000—nowhere near enough to drop PMI.

It’s a common trap, especially because this popular hack often compresses the complex calculus that goes into home renovations and appraisals into tidy arithmetic.

For one thing, home improvements are rarely a dollar-for-dollar investment. The Remodeling Impact Report from the National Association of Realtors® reports that only putting in a steel front door delivered a 100% cost recovery for remodeling projects in 2025.

More popular (and expensive) projects like a new primary suite, bathroom renovation, or complete kitchen renovation recouped 50% to 60%—though these projects often reaped a higher “joy score,” underlining the disparities between how a homeowner might feel about their renovations and how the market prices them.

The better approach

Since your renovations probably mean more (and hold more value) to you than to an appraiser, Schuiteboer suggests using a simpler approach: Create two clear scenarios and compare them over realistic timelines.

In Scenario A, you put 5% down, accept that you’ll have PMI, but keep a larger cash cushion. In Scenario B, you put 20% down, avoid PMI, but have a smaller cash reserve. Which option helps you succeed in the long run?

If your income changes from month to month or you’re buying a home that might need unexpected repairs, having a strong emergency fund can be more important than the monthly cost of PMI. But if your job is steady and you want to keep your housing costs low, making a bigger down payment to avoid PMI can be the better choice, especially if it means you won’t need to refinance or get a lender-approved appraisal later. 

Schuiteboer also urges the borrowers he works with to sanity-check assumptions that determine whether PMI is a short-term bridge or a long-term tax.

For one, if you’re planning on refinancing, remember that it works only if interest rates are favorable. If rates go up, refinancing to remove PMI could still raise your monthly payment.

Home appreciation is another factor that many borrowers assume will happen, but it’s not guaranteed. If the market grows by about 3% each year, you could build equity faster than in a flat market, but relying on appreciation is not the same as being able to control it. 

Your credit score also matters. PMI costs depend a lot on your credit, so if you expect your score to improve in the next year or two, it might be better to wait before making big decisions. That way, you can get better PMI rates or refinance on stronger terms.

His point is that there isn’t a scenario that’s universally smarter. What ultimately makes the most sense will depend on your risk profile and what you need your cash to do in the first few years of ownership.