What is the criterion for a lender to allow termination of private mortgage insurance?

The termination of private mortgage insurance (PMI) is guided by specific criteria that protect the lender while also providing a pathway for borrowers to reduce their monthly payments once they have built sufficient equity in their property.

One widely accepted criterion for the termination of PMI is when the loan balance falls to 78% of the original property value at the time of purchase. This threshold is often mandated by the Homeowners Protection Act, which requires lenders to automatically cancel PMI once the borrower has reached at least 22% equity in the home based on the original value.

The option regarding the 80% threshold relates to borrowers who can request PMI cancellation when their loan balance falls below 80% of the current market value of the property. This is typically determined by a new appraisal or using market trends that reflect the property's appreciated value.

Thus, the correct answer encompasses all scenarios presented, as PMI can often be terminated when the loan reaches both the lower percentages of original value and current value, which aligns with various lender policies and regulatory guidelines. Consequently, all options provided can be viewed as valid criteria depending on the circumstances surrounding the property value and equity position of the borrower.