Under conventional loans, PMI can be canceled when what occurs?

• A. The loan age reaches 15 years.
• B. Equity reaches certain levels.
• C. The borrower requests cancellation after one year.
• D. PMI remains for the life of loan.

Answer: (A)

Equity in the home drives PMI cancellation on conventional loans. PMI is designed to protect the lender when you have relatively little equity, so you can remove it once you’ve built enough equity.

Automatic termination typically happens when your loan balance reaches 78% of the original property value, provided you are current on payments. You can also request cancellation once your loan balance reaches 80% of the original value, and you’re current with timely payments (often with no late payments in the recent history). Sometimes the lender may require an appraisal to verify current value for the 80% threshold.

Because these triggers are based on equity (LTV), not on a set number of years, the option reflecting “equity reaches certain levels” is the correct concept. Time alone or asking after a fixed period doesn’t guarantee cancellation, and PMI isn’t automatically kept for the life of the loan on conventional loans.