When does PMI automatically terminate?

The termination of Private Mortgage Insurance (PMI) is linked to the equity the borrower has in the property. Specifically, PMI automatically terminates when the borrower's equity in the home reaches 22% of the original purchase price or the appraised value at the time the loan was taken out. This threshold is established by the Homeowners Protection Act, which aims to protect borrowers by ensuring that they are no longer required to pay for PMI once they have built sufficient equity in their home.

In contrast, the other options focus on different scenarios that do not determine PMI termination. Paying off half of the loan may not necessarily correlate with the required equity percentage, refinancing a loan does not automatically mean PMI will be removed, and switching insurance providers does not remove PMI unless specific equity conditions are met. Therefore, the correct answer reflects the specific equity threshold defined by law that triggers the automatic termination of PMI.