The requirement for private mortgage insurance is generally discontinued when the loan-to-value ratio reaches:

The requirement for private mortgage insurance is generally discontinued when the loan-to-value ratio reaches:

• A. 90%
• B. 20%
• C. 50%
• D. 80%

Answer: (D)

Private mortgage insurance exists to protect the lender when the borrower has less than 20% equity. As you pay down the loan or the home’s value rises, the loan-to-value ratio (LTV) falls. When the LTV reaches about 80%, the risk to the lender is low enough that PMI can be removed. In practice, automatic termination commonly occurs around 78% LTV (based on original value) if payments are current, and borrowers can request cancellation once the LTV reaches 80% (based on original value), assuming good standing. So the standard threshold at which PMI is discontinued is 80% LTV.

Private mortgage insurance exists to protect the lender when the borrower has less than 20% equity. As you pay down the loan or the home’s value rises, the loan-to-value ratio (LTV) falls. When the LTV reaches about 80%, the risk to the lender is low enough that PMI can be removed. In practice, automatic termination commonly occurs around 78% LTV (based on original value) if payments are current, and borrowers can request cancellation once the LTV reaches 80% (based on original value), assuming good standing. So the standard threshold at which PMI is discontinued is 80% LTV.