Question:

What is lender paid mortgage insurance (LPMI)?

Answer:

Lender paid mortgage insurance (LPMI) is a convenient way to avoid paying PMI when a down payment of less than 20% is made. The LPMI will get you higher rates but no PMI.

Advantages of Lender Paid Mortgage Insurance (LPMI)

Usually, your mortgage payment will be lower with an LPMI, rather than with a normal private mortgage insurance. Also, PMI is not tax deductible whereas interest is - you can benefit better with tax deductions with an LPMI.

It may be great to have the option to choose between private mortgage insurance (PMI) and lender paid mortgage insurance (LPMI). If you are going to keep your home for several years only and then sell, LPMI may be the better way to go. If you are planning on keeping your home for life, you'd be better off taking a regular PMI, as you have the right to cancel it when your LTV reaches 80%.

However, do not take a lender paid mortgage insurance (LPMI) if you are not planning to keep this house. You will be stuck with a higher rate and may even have to refinance.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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