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.
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.