Private mortgage insurance (PMI) is insurance that protects the lender on many conventional mortgages when the down payment is below 20% of the property value. For an eligible conventional loan, a borrower may request cancellation when the principal balance reaches 80% of original value; scheduled automatic termination may occur at 78% when legal and loan conditions are met. The servicer decides eligibility.
what is pmi and when can it be removed: the measured relationship
PMI is mortgage insurance paid by the borrower that protects the lender rather than the homeowner if the borrower stops making payments. PMI is an ongoing consequence of a smaller conventional down payment. It differs from closing costs, which are transaction charges, and from PITI, which names principal, interest, taxes, and homeowners insurance. Government-loan mortgage-insurance rules can differ from conventional PMI.
| Original property value | $400,000 |
|---|---|
| Starting loan | $360,000 (90% LTV) |
| 80% original-value balance | $320,000 |
| 78% original-value balance | $312,000 |
what is pmi and when can it be removed: a worked dollar case
A $400,000 original value with a $360,000 loan starts at 90% loan-to-value. Eighty percent of original value is $320,000; 78% is $312,000. The difference between a $360,000 balance and those thresholds shows why the amortization schedule matters. Paying $40,000 of principal does not alone guarantee cancellation: payment history, loan type, current value rules, and servicer procedures can apply.
what is pmi and when can it be removed: calculation method
Loan-to-value ratio = unpaid principal balance ÷ stated property value × 100. For the original-value milestones, calculate $320,000 as $400,000 × 80% and $312,000 as $400,000 × 78%, then compare those dollar amounts with the scheduled unpaid principal balance.
equityledger related calculations: mortgage amortization schedule; loan-payment model; payment schedule.
Audit the What is PMI and when can it be removed? scenario
equityledger timing check. Record Original property value as $400,000. equityledger timing review changes Starting loan to $360,000 (90% LTV) and keeps the unit beside the figure. A equityledger timing comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger cash-flow check. Record Starting loan as $360,000 (90% LTV). equityledger cash-flow review changes 80% original-value balance to $320,000 and keeps the unit beside the figure. A equityledger cash-flow comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger rate check. Record 80% original-value balance as $320,000. equityledger rate review changes 78% original-value balance to $312,000 and keeps the unit beside the figure. A equityledger rate comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger balance check. Record 78% original-value balance as $312,000. equityledger balance review changes Original property value to $400,000 and keeps the unit beside the figure. A equityledger balance comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger disclosure check. Record Original property value as $400,000. equityledger disclosure review changes Starting loan to $360,000 (90% LTV) and keeps the unit beside the figure. A equityledger disclosure comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger schedule check. Record Starting loan as $360,000 (90% LTV). equityledger schedule review changes 80% original-value balance to $320,000 and keeps the unit beside the figure. A equityledger schedule comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger threshold check. Record 80% original-value balance as $320,000. equityledger threshold review changes 78% original-value balance to $312,000 and keeps the unit beside the figure. A equityledger threshold comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger payment check. Record 78% original-value balance as $312,000. equityledger payment review changes Original property value to $400,000 and keeps the unit beside the figure. A equityledger payment comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger property check. Record Original property value as $400,000. equityledger property review changes Starting loan to $360,000 (90% LTV) and keeps the unit beside the figure. A equityledger property comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger income check. Record Starting loan as $360,000 (90% LTV). equityledger income review changes 80% original-value balance to $320,000 and keeps the unit beside the figure. A equityledger income comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger insurance check. Record 80% original-value balance as $320,000. equityledger insurance review changes 78% original-value balance to $312,000 and keeps the unit beside the figure. A equityledger insurance comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
equityledger term check. Record 78% original-value balance as $312,000. equityledger term review changes Original property value to $400,000 and keeps the unit beside the figure. A equityledger term comparison recalculates the stated relationship from those two dated inputs, instead of reusing a rounded intermediate amount.
Keep a decision record
equityledger timing record. The equityledger worksheet pairs 80% original-value balance ($320,000) with 78% original-value balance ($312,000). A equityledger timing decision tests the effect of that pair before adding another assumption. Keep the equityledger timing source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger cash-flow record. The equityledger worksheet pairs 78% original-value balance ($312,000) with Original property value ($400,000). A equityledger cash-flow decision tests the effect of that pair before adding another assumption. Keep the equityledger cash-flow source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger rate record. The equityledger worksheet pairs Original property value ($400,000) with Starting loan ($360,000 (90% LTV)). A equityledger rate decision tests the effect of that pair before adding another assumption. Keep the equityledger rate source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger balance record. The equityledger worksheet pairs Starting loan ($360,000 (90% LTV)) with 80% original-value balance ($320,000). A equityledger balance decision tests the effect of that pair before adding another assumption. Keep the equityledger balance source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger disclosure record. The equityledger worksheet pairs 80% original-value balance ($320,000) with 78% original-value balance ($312,000). A equityledger disclosure decision tests the effect of that pair before adding another assumption. Keep the equityledger disclosure source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger schedule record. The equityledger worksheet pairs 78% original-value balance ($312,000) with Original property value ($400,000). A equityledger schedule decision tests the effect of that pair before adding another assumption. Keep the equityledger schedule source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger threshold record. The equityledger worksheet pairs Original property value ($400,000) with Starting loan ($360,000 (90% LTV)). A equityledger threshold decision tests the effect of that pair before adding another assumption. Keep the equityledger threshold source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger payment record. The equityledger worksheet pairs Starting loan ($360,000 (90% LTV)) with 80% original-value balance ($320,000). A equityledger payment decision tests the effect of that pair before adding another assumption. Keep the equityledger payment source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger property record. The equityledger worksheet pairs 80% original-value balance ($320,000) with 78% original-value balance ($312,000). A equityledger property decision tests the effect of that pair before adding another assumption. Keep the equityledger property source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger income record. The equityledger worksheet pairs 78% original-value balance ($312,000) with Original property value ($400,000). A equityledger income decision tests the effect of that pair before adding another assumption. Keep the equityledger income source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger insurance record. The equityledger worksheet pairs Original property value ($400,000) with Starting loan ($360,000 (90% LTV)). A equityledger insurance decision tests the effect of that pair before adding another assumption. Keep the equityledger insurance source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
equityledger term record. The equityledger worksheet pairs Starting loan ($360,000 (90% LTV)) with 80% original-value balance ($320,000). A equityledger term decision tests the effect of that pair before adding another assumption. Keep the equityledger term source document with the result, because a revised statement, disclosure, assessment, or account term changes the input rather than the arithmetic.
Common mistakes in What is PMI and when can it be removed?
Do not assume home-price appreciation automatically cancels PMI, or that reaching 20% equity by a casual estimate is enough. Do not confuse homeowners insurance with PMI: homeowners insurance protects the property owner against covered risks, while PMI protects the lender's risk.
Where this calculation stops
Cancellation rules depend on the loan, occupancy, payment history, original versus current value, and the servicer. Request the current written requirements and use the servicer's balance figure. This page does not determine FHA, VA, or other government-program insurance rules.
what is pmi and when can it be removed: source check
Fannie Mae states that conventional borrowers can request cancellation at 80% of original value and that PMI may be automatically terminated at 78% on the scheduled date; it also lists payment-history conditions. Read the named source. The equityledger record should be reconciled to the disclosure, statement, tax bill, or agreement that governs that exact transaction.
what is pmi and when can it be removed: using the output
The equityledger output keeps each input's named unit and date adjacent to the result. Update the equityledger scenario when its rate, balance, payment, or property value changes.