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PMI Drop Balance Formula:
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PMI (Private Mortgage Insurance) Drop Balance is the loan balance at which you can request cancellation of your PMI. Typically, this occurs when your loan-to-value ratio reaches 80% of the original property value.
The calculator uses the PMI Drop Balance formula:
Where:
Explanation: This calculation determines the mortgage balance at which you reach the 80% loan-to-value ratio, allowing you to request cancellation of PMI payments.
Details: Knowing your PMI drop balance helps you track progress toward eliminating PMI payments, which can save homeowners hundreds of dollars annually. It's an important milestone in building home equity.
Tips: Enter your original loan amount in dollars. The calculator will determine the balance needed to reach the 80% loan-to-value threshold for PMI cancellation.
Q1: Is PMI automatically cancelled at 80% LTV?
A: For conventional loans, lenders must automatically terminate PMI when you reach 78% LTV based on the original amortization schedule. You can request cancellation at 80% LTV.
Q2: Does home appreciation affect PMI cancellation?
A: Yes, if your home value has increased significantly, you may reach the 80% LTV threshold sooner through a new appraisal, even if your loan balance hasn't decreased to the calculated drop balance.
Q3: Are there different rules for FHA loans?
A: Yes, FHA loans have different PMI rules. For loans originated after June 3, 2013, FHA mortgage insurance typically lasts for the life of the loan if you put down less than 10%.
Q4: What documentation is needed to cancel PMI?
A: Typically, you'll need to provide a written request, demonstrate a good payment history, and possibly get a current appraisal to verify your home's value.
Q5: Can I cancel PMI before reaching 80% LTV?
A: Generally, no. Lenders require you to reach at least 80% loan-to-value ratio based on the original property value or current appraised value before canceling PMI.