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Lender Paid Mortgage Insurance (LPMI)

Private mortgage insurance (PMI) is required on conventional (non-government) loans with loan amounts greater than 80% of the home value. PMI protects lenders from potential losses due to non-payment of the loan. PMI is not the same as homeowners insurance, which protects you from losses due to such things as fire, wind, and vandalism.
There are two types of mortgage insurance:
  • Borrower-paid mortgage insurance (BPMI)
  • Lender-paid mortgage insurance (LPMI)
Lender-paid mortgage insurance Borrower-paid mortgage insurance
  • Cost of PMI included in the interest rate
  • Potentially lower monthly mortgage payment
  • Potentially larger tax deduction than BPMI1
  • Cannot be canceled
  • Premium added to monthly mortgage payment
  • Potentially higher monthly mortgage payment
  • May be tax deductible1
  • May be canceled at a certain point2
May be an option if you:
  • Are likely to move or refinance within 10 years
  • Have a shorter term mortgage
  • Need a loan amount above 85% of your home value
  • Prefer a reduced monthly mortgage payment
  • Are interested in a potentially larger tax deduction1
May be an option if you:
  • Will remain in your home for more than 10 years
  • Have a longer term mortgage
  • Need a loan amount under 85% of your home value
  • Prefer to make higher payments now so you can cancel down the road
  • Expect an increase in home value