What is the minimum equity percentage a borrower must achieve to request PMI cancellation?

The correct answer is 22%. In the context of private mortgage insurance (PMI), lenders typically allow homeowners to request the cancellation of PMI once they reach a certain amount of equity in their property. Specifically, under the Homeowners Protection Act, borrowers may request PMI cancellation once they have built up at least 20% equity based on the original value of the home. However, the lender is mandated to automatically terminate PMI when the borrower's equity reaches 22%, provided that the borrower is current on their payments.

This equity percentage is based on the appraised value at the time of purchase, and reaching this level signifies a significant investment from the borrower in their property. Therefore, the 22% figure is important because it not only represents a threshold for homeowners to proactively cancel PMI but also serves as a protection for borrowers as PMI will be removed automatically by the lender at that equity level.