Which of the following is true regarding private mortgage insurance (PMI) and loan-to-value ratios?

• A. PMI is always required regardless of LTV
• B. PMI is discontinued when LTV reaches 80%
• C. PMI is required only if down payment is more than 20%
• D. PMI can be removed when LTV reaches 90%

Answer: (B)

PMI is tied to how much equity you have in the home. Lenders require private mortgage insurance when your loan-to-value ratio is above 80% (that is, you’ve put down less than 20%). As you pay down the loan and your LTV drops to 80% or lower, you become eligible to stop paying PMI—usually by requesting cancellation (you must be current on payments). Many programs also have automatic termination around 78% LTV of the original property value, but you typically can remove PMI once you reach 80% LTV, given you’re in good standing.

So, the idea that PMI can be discontinued when LTV reaches 80% aligns with the common practice of removing PMI as you reach 20% equity. The other statements don’t fit: PMI isn’t required regardless of LTV, it’s not removed at 90% LTV, and it’s not correct that PMI is required only when the down payment is more than 20%.