Answer :
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.
The amount should be $117,000.
Given that,
- The purchase value of the house is $150,000.
- The borrowed amount is $140,000.
- The house value now is $162,000.
Based on the above information, the calculation is as follows:
- The termination of the PMI policy should be ended when the owner of the bond loan decline to 78% of the purchase value i.e.
= 78% of $150,000
= $117,000
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