At what LTV ratio does PMI typically drop off for a borrower?

Private Mortgage Insurance (PMI) is usually required by lenders when a borrower makes a down payment of less than 20% of the home's purchase price. The purpose of PMI is to protect the lender in case the borrower defaults on the loan. Once the loan-to-value (LTV) ratio reaches 80%, many lenders allow the borrower to cancel PMI.

This means that when the borrower has achieved an equity stake of 20% in their property (either through mortgage payments or appreciation in the home's value), they can typically request that the PMI be removed. This provides significant savings on the monthly mortgage payment, making homeownership more affordable over time.

While some lenders may have different thresholds, the standard industry practice widely acknowledges 80% LTV as the point at which PMI usually drops off. Understanding this metric is essential for borrowers, as it can significantly affect their financial commitments and overall homeownership costs.