What Is the 80/20 Rule?
The 80/20 rule refers to the loan-to-value (LTV) threshold where private mortgage insurance (PMI) is no longer required. When your loan balance is 80% or less of your home's value—meaning you have 20% equity—lenders no longer require PMI protection.
For Broomfield County homeowners, rising property values may have accelerated your path to 20% equity. A home purchased for $550,000 in 2021 with 5% down might now be worth $650,000+, potentially putting you well past the 80% threshold even with minimal principal paydown.
Two Ways to Eliminate PMI
Request PMI Cancellation
Contact your current lender and request PMI removal. You'll typically need to reach 80% LTV based on original value, or 75% based on current appraised value. No refinance needed, but your rate stays the same.
Refinance to Remove PMI
Refinance into a new loan at 80% LTV or less. This eliminates PMI and potentially lowers your rate. Makes sense when rates have dropped or your current rate is above market.
Calculate Your Current Equity
Equity Formula
Example: Home worth $600,000 with $450,000 loan balance
($600,000 - $450,000) ÷ $600,000 = 25% equity (below 80% LTV)
If your calculation shows 20%+ equity, you're a candidate for PMI removal. Mandie can help you get a current property valuation and determine whether refinancing or a simple PMI cancellation request makes more sense.
When Refinancing Makes Sense
These scenarios are for education and illustration purposes only.
Broadlands Townhome
Purchased 2022 at $475,000 with 5% down. Now worth $540,000.
Owner can refinance at 6.25%, removing PMI and lowering rate. Combined savings of $380/month justify the closing costs.
Arista Condo
Purchased 2023 at $425,000 with 10% down. Now worth $445,000.
Still slightly above 80% LTV. Owner should wait for more appreciation or make a lump-sum payment to reach 80%, then request PMI cancellation without refinancing.
Anthem Single Family
Purchased 2021 at $725,000 with 5% down. Now worth $850,000.
Strong equity position and high PMI make refinancing attractive. Even at a similar rate, eliminating $425/month PMI provides significant savings.
Important Disclaimer: The scenarios above are for educational and illustration purposes only. They do not constitute an offer or commitment to lend, nor do they guarantee specific rates, fees, or terms. Actual costs and savings vary based on loan type, credit profile, property details, and current market conditions. Contact Mandie for a personalized analysis based on your specific situation.