medium · National Real Estate Exam financing
A borrower has a conventional loan with an 85% LTV. They have made all payments on time for three years. They find out their neighbor sold a similar house for a high price, putting their equity at 25%.
Can they stop paying PMI?
- No, PMI can only be removed if they pay down the actual principal balance to 78%.
- Yes, it stops automatically because they have 25% equity.
- No, they must wait until the loan reaches the 78% LTV mark on the original schedule.
- Yes, but they must usually request cancellation and provide an appraisal to the lender.
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