Question

PMI will no longer be necessary on a 100% LTV ratio loan of $178,000 when the LTV reaches 75%. The property, having appreciated in value, is now worth $210,000. How much of the principal of the loan will have to be paid off before the PMI can be dropped?

Answer 1

To drop the PMI on a 100% LTV ratio loan of $178,000, the principal that needs to be paid off is $20,464.

Step-by-step explanation:

To calculate the amount of principal that needs to be paid off before PMI can be dropped, we first need to find the current loan-to-value (LTV) ratio. The LTV ratio is given by:

LTV ratio = loan amount / appraised value

Given that the loan amount is $178,000 and the appraised value is $210,000, we can find the current LTV ratio:

LTV ratio = $178,000 / $210,000 = 0.8476

Next, we subtract the desired LTV ratio (0.75) from the current LTV ratio to find the difference:

Difference = current LTV ratio - desired LTV ratio = 0.8476 - 0.75 = 0.0976

Finally, we multiply the difference by the appraised value to find the amount of principal that needs to be paid off:

Principal to be paid off = difference * appraised value = 0.0976 * $210,000 = $20,464