Mortgage · PMI Math
How to Calculate Your Loan-to-Value Ratio for PMI
Get the LTV math wrong and you could keep paying private mortgage insurance for months after you actually qualified to drop it. Here is exactly how the ratio is calculated, which home value counts, and where the rules can trip you up.
Why one ratio decides when your PMI payment stops
Private mortgage insurance exists to protect the lender if you stop paying your loan, not to protect you. Once your ownership stake in the home reaches a certain point, federal law gives you rights to get rid of it, sometimes automatically. That entire trigger comes down to one number: your loan-to-value ratio, or LTV, which is simply how much you still owe compared to what the home is worth.
Under the Homeowners Protection Act, servicers must automatically end PMI on most loans when the balance is scheduled to hit 78% of the home's original value, and borrowers can request cancellation earlier, once they reach 80%. Getting your own LTV calculation right tells you whether you are close to that line now, or whether your servicer's math and yours disagree.
The basic formula: loan balance divided by home value
The core calculation is short. Take your current loan balance and divide it by the home's value. Multiply by 100 to get a percentage.
LTV = (current loan balance ÷ home value) x 100
Your current loan balance is the unpaid principal on your mortgage statement, not the original loan amount you borrowed. Your home's value is where the complications start, because federal rules use different values depending on which cancellation path applies to you.
Original value vs. current value: which one your servicer uses
For the automatic termination date (the 78% mark) and for borrower-requested cancellation at the 80% mark on a normal schedule, the Homeowners Protection Act defines original value as the lesser of the contract sales price or the appraised value at the time you closed the loan. This number does not move even if your home has gained value since then.
That changes if you have made significant improvements, or if home values in your area have shifted a lot since purchase. In those cases, a servicer may agree to use a new appraisal to establish current value instead of original value, but this is discretionary and typically requires you to request it and pay for the appraisal yourself. Fannie Mae's servicing guidance describes borrower-requested paths for loans it owns or backs.
So before you calculate, know which value applies to your situation: the number from your closing disclosure, or a fresh appraisal you have separately requested.
A worked example showing the math in practice
Say your home's original value at closing was $250,000 (a labeled example, not a claim about your loan). Your current unpaid principal balance is $200,000.
LTV = ($200,000 ÷ $250,000) x 100 = 80%
At exactly 80%, you can submit a written request to your servicer to cancel PMI, provided you meet other conditions like a current payment history and no second liens on the home. If your balance instead sat at $195,000 against that same $250,000 original value, your LTV would be 78%, the point at which automatic termination is generally required by law on your scheduled amortization date, whether or not you have asked.
The free PMI Cancellation Checker can run these numbers for you if you would rather not do the arithmetic by hand, using the figures from your mortgage statement and closing documents.
What can throw off your calculation
A few things commonly confuse this math. Extra principal payments lower your loan balance faster than the scheduled amortization, which can put you below 80% earlier than your servicer's own projected termination date accounts for, so it is worth recalculating after any lump-sum payment.
Second mortgages and home equity lines complicate things too. If you have a second lien on the property, most servicers will not cancel PMI until the combined loan-to-value across both loans reaches the required threshold, not just the first mortgage alone.
Loans that are considered high-risk when originated may follow a different schedule for automatic termination, sometimes not until the midpoint of the loan term. And LTV rules for PMI cancellation generally apply to loans on a borrower's primary residence, not investment properties, where servicer policies vary more. If any of this applies to you, the complete PMI cancellation playbook walks through how each scenario changes the calculation and the request process.
What to do once your numbers line up
If your calculation shows you are at or near 80%, the next step is a written request to your servicer, since the law requires cancellation requests to be made in writing for the earlier 80% threshold. A cancellation letter template can help you put the request in the right form with the details your servicer needs.
Keep in mind that your own math is a starting point, not the final word. Your servicer will confirm the loan balance and, in most cases, the value figure before removing PMI, and they may require a current appraisal if you are relying on appreciation rather than paying down principal. If your numbers and your servicer's do not match, ask them in writing which value and which balance date they used, and compare it against your own closing documents and payment history. This is not financial or lending advice; it is educational material to help you understand your rights and options.
Questions people ask
Does LTV use my home's current market value or what I paid for it?
For most automatic PMI termination and standard cancellation requests, it uses the original value from your closing, defined as the lesser of the sales price or appraised value at purchase. Current market value only comes into play if you separately request a new appraisal, and your servicer agrees to use it.
Do extra mortgage payments lower my LTV faster?
Yes. Any payment that reduces your principal balance faster than the original amortization schedule lowers your loan-to-value ratio ahead of your servicer's originally projected termination date, so it is worth recalculating after large extra payments.
Does a second mortgage affect my PMI-related LTV calculation?
It can. If you have a second lien on the property, many servicers look at the combined loan-to-value across both loans before approving cancellation, not just the balance on your primary mortgage.
What if my servicer's LTV calculation does not match mine?
Ask your servicer in writing which loan balance date and which home value figure they used, then compare that to your closing documents or a recent statement. Discrepancies are often a matter of which date's balance was used or whether original versus appraised value applies.
Sources
- CFPB: When can I remove PMI?
- CFPB: What is private mortgage insurance?
- Fannie Mae Servicing Guide: Conventional Mortgage Insurance
- Homeowners Protection Act (12 USC ch. 49)
This article is educational and is not financial or lending advice. Some links in our articles may earn us a commission at no cost to you, and never change what we recommend.
