What percentage of the property's original value triggers the cancellation of PMI?

The cancellation of Private Mortgage Insurance (PMI) is triggered when the borrower reaches a certain equity threshold based on the original value of the property. In most cases, PMI can be canceled when the equity in the property reaches 20%, which corresponds to a loan-to-value (LTV) ratio of 80%. However, specific guidelines state that PMI can be canceled automatically when the loan balance reaches 78% of the original property value, ensuring that the lender's risk is minimized.

This specific percentage is typically established by federal regulations, which allow homeowners to request cancellation when reaching 80% equity, but the automatic termination occurs when the balance is at 78%. Therefore, reaching this percentage ensures that the borrower has gained sufficient equity in the home, minimizing the bank's exposure and allowing the borrower to eliminate PMI costs.