$23,695.00 if invested would net $1,850.00 annually in the market, or about $157.00 each month. (Assuming 8% growth for simplicity, and ignoring exponential gains).

While PMI is annoying, you are at a loss the instant you pay extra. Significantly more so once you account for 30-Year opportunity loss, compound gains, and the variable of interest rate vs market rate on the funds.

If you can do it for the price of an appraisal (~$400), knock yourself out. Otherwise, you have to get to 78% LTV which will cost you money you can never get back.

The math says no.

The math says yes. The pmi is costing $1200/year and the interest on the portion of the loan that carries pmi ($23,695) is $710 @ 3% interest. At 3% interest on the loan, paying off PMI beats 8% returns.

PMI can't be treated like interest added to the cost of the whole loan. It's only applied to the top 20%.

Correct.... However any early payments made **now** must be carried through the life of the loan. The* lost opportunity cost* will remain for 30 years (or whatever slightly shorter remaining loan time is applied) as well as indefinitely into the future due to lost time to compound things.

Thats why not paying it off wins long term, because operating on margin the gains are that big compared to spending PMI.

The actual gains including compounding on only the 23k above is 261,125.49 for 30 years.

The gains from paying off the mortgage to reduce pmi on 23k at 3% is 58,214.88 PLUS 100$ a month for approx. 101 payments (unsure original as OP hasn't provide full loan data) is an additional $10,100.00 for a **TOTAL OF $68,314.88** in savings.

Lost Opportunity of $261,125.49

is greater than

Savings of $68,314.88

Paying off a 3% fixed 30-year loan early, even to remove PMI, **does not make financial sense**....

In this case it makes $192,810.61 worth less sense....

@Longwell , I hope your paying attention. I was in your shoes.

I think your analysis is off; I don't see where you add in the opportunity cost for the saved PMI. As in, you compound the 23k over 30 years, but didn't compound the PMI savings

It looks like you're using a 12% stock return which is probably a bit much, but even so the saved $10,000 in PMI will negate about $115k of your estimate.

23k in stock compounded @10% = 177k

Interest savings (your number) = 58k

PMI savings + opportunity cost = 10k + 77k

177k - 145k = 32k

Over 30 years, there isn't a huge difference, but the closer you get to paying down to 80%, the better it's going to look since it's a flat payment.

You are right. The 'smallness' of the loan and the investment opportunity to make things get closer together than normal. I was using 8% return on stocks.

If we account for inflation as well, the numbers turn out as follows:

The actual gains including compounding on only the 23k above is 261,125.49 for 30 years. (at 8% annual rate).

The gains from paying off the mortgage to reduce pmi on 23k at 3% is 58,214.88 PLUS 100$ a month for approx. 101 payments (unsure original as OP hasn't provide full loan data) is an additional $10,100.00. However, saving $10,100 isn't small potatoes and the PMI not paid (gains because it wasn't paid) invested for 30 years at 8% will net $80,189.53 at the end of 30 years. However, you will lose 12,900 in payments that would have been inflation delayed across 360 months, at a average inflation rate of 3.22%, which is another net loss of 20,992.19 (33,892.19 - initial 'principal' of 12,900 un-inflated dollars) that could have been paid with future dollars but wasn't. I am excluding 'savings' from not 'spending' PMI out of that number, or else it would have been higher.

Lost Opportunity of $261,125.49

is greater than

Savings of $117,412.22 ($58,214.88 + 80,189.53 - 20,992.19)

**<$143,713.27 NET LOSS>**If you don't care about inflation, then its:

Lost Opportunity of $261,125.49

is greater than

Savings of $138,404.41 ($58,214.88 + 80,189.53)

**<$122,721.08 NET LOSS>**So you will lose $143,713.27 across 30 years if you prepay or, alternatively, if you want to plug your fingers in your ears and ignore inflation, you can lose $122,721.08 across 30 years.

Thats (nearly) enough to put a kid through college.

Almost enough to buy another house in cash.

Buy a couple of Tesla Model S for retirement...

Pretending that it a large sum of money, and that 'you can just work for another year to make up for it' is really terrible financial planning. Especially on a FIRE forum.