Lender Paid Private Mortgage Insurance
Lender Paid Mortgage Insurance or LPMI is a way to avoid paying traditional mortgage insurance on a conventional home loan. In return for a small increase to your interest rate, the lender will pay the mortgage insurance for you. Lender-paid mortgage insurance is a form of insurance that protects the lender in the event of default by the borrower. It is usually required on loans that carry higher-than-average risk.
This benefits you the borrower in several ways:
- The payment on this type of loan is usually lower than a no PMI loan or traditional loan with Private Mortgage Insurance (PMI).
- Generally you will be in a better tax situation due to the increase in interest paid.
- As of 2014 PMI is no longer tax deductible. Please contact your tax advisor for specifics.