A borrower purchased a home for $300,000 with a 10% down payment. The original loan amount was $270,000. At what remaining loan balance would PMI automatically terminate under the Homeowners Protection Act?
Correct Answer
B) $234,000
PMI automatically terminates at 78% LTV of the original property value. 78% of $300,000 = $234,000. The remaining loan balance must reach $234,000 for automatic termination.
Why This Is the Correct Answer
PMI automatically terminates at 78% LTV of the original property value. 78% of $300,000 = $234,000. The remaining loan balance must reach $234,000 for automatic termination.
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A borrower wants to use a current appraisal to demonstrate 80% LTV for PMI cancellation. Under the Homeowners Protection Act, what may the lender require?