Lender Paid Mortgage Insurance (LPMI)

Lender Paid Mortgage Insurance or LPMI is a way to avoid paying traditional mortgage insurance. In return for a small increase to your interest rate, the lender will pay the mortgage insurance for you.

This benefits you the borrower in several ways:
1. The payment on this type of loan is usually lower than a no PMI loan or traditional loan with Private Mortgage Insurance (PMI).
2. Generally you will be in a better tax situation due to the increase in interest paid.

Lender paid mortgage insurance should be carefully looked at before obtaining. If you plan on keeping your home for the life of the loan, you are locked into a great fixed interest rate and never have any plan of refinancing that mortgage then it may be better to pay the PMI instead of the Lender paid mortgage insurance. With the lender paid mortgage insurance you are stuck with the increase to your interest rate for the life of the loan and with the PMI you are able to drop it at either 78% or 80% (depending on your lender and their guidelines) loan to value of your home. Therefore, it could end up costing you more with the LPMI than it would with the regular PMI. However, most people sell or refinance within five years so the LPMI is a nice option for many people.

If simplicity is one of your goals, a LPMI loan might benefit you with eliminating the hassle of paying two loans. Consult with your loan consultant as to when the Mortgage Insurance can be waived.