Question

"carrie bought a house five years ago for $150,000. at that time she borrowed $140,000 from her bank. the house is now worth $162,000. her pmi will automatically be dropped when her mortgage balance drops to:"

Answer 1

Answer: PMI will automatically be dropped when the balance reaches $117,000.

Explanation: PMI stands for private mortgage insurance. This is an insurance policy that banks often require lenders to have when they do not have a 20% down payment on a new home.

PMI is automatically dropped with the amount of the mortgage due is reduced to 78% of the original appraised value of the home. In this case, the home was originally purchased for $150,000. 78% x 150,000 = $117,000. When the loan reaches $117,000 the pmi will automatically be dropped.