Posted on: 11th Apr, 2010 11:16am
If the down payment amount on your mortgage loan is less than 20% of the purchase price of your home, then you are required to buy private mortgage insurance (PMI). This insurance actually safeguards the lender in case you make default in mortgage payments. Usually you pay monthly premium for PMI and it adds to your monthly payment amount. Some lenders however offer Lender Paid Mortgage Insurance (LPMI) that somewhat lowers down the monthly payment amount.LPMI is a kind of misnomer. The truth is that nobody is going to pay for you without getting something in return. Here you actually pay for the insurance in the form of a slightly higher rate of interest. Still the LPMI has some distinct advantages:
In today’s mortgage market, it is however somewhat difficult to find this mortgage product. Even a few years ago, LPMI was relatively more popular but nowadays it’s really tough to find this product. Anyways, LPMI is not a very good option for all. To qualify for this, you should however have a very good credit score. If you are a borrower with high income, then LPMI is a better choice as you enjoy higher tax deduction because of higher rate of interest.If you don’t like LPMI, you have two options left. Firstly, you can make a down payment of at least 20% of the purchase price of the house. However, not all of you can afford to pay that hefty down payment. Secondly, you can use PMI, instead of LPMI.
- The payment that you make on this type of loan is generally lower than a traditional loan with PMI or a no PMI loan.
- You will enjoy some tax benefits through paying higher rate of interest.
In today’s mortgage market, it is however somewhat difficult to find this mortgage product. Even a few years ago, LPMI was relatively more popular but nowadays it’s really tough to find this product. Anyways, LPMI is not a very good option for all. To qualify for this, you should however have a very good credit score. If you are a borrower with high income, then LPMI is a better choice as you enjoy higher tax deduction because of higher rate of interest.If you don’t like LPMI, you have two options left. Firstly, you can make a down payment of at least 20% of the purchase price of the house. However, not all of you can afford to pay that hefty down payment. Secondly, you can use PMI, instead of LPMI.
i have to refinance due to divorce, home lost equity plus ex-husband spent a lot of the heloc. i need to refinance but will cost about 3800 in refi fees which will be rolled into the 1st and 2nd mortgage balance of 214.
so the best deal my broker could get me was a 5.2% down from 5.87%, but will have total payments of 1700 per month (200 is pmi).
i am only planning to stay in this house 3 years more maximum. therefore since i only have about $10,000 of equity in my house, i would rather do a lender paid pmi.
how come i have never heard of this before? this would be a much better option for me. i plan on requesting it tomorrow, but are there certain qualifiers? i have an excellent credit score and have steady recession proof full time employement.
so the best deal my broker could get me was a 5.2% down from 5.87%, but will have total payments of 1700 per month (200 is pmi).
i am only planning to stay in this house 3 years more maximum. therefore since i only have about $10,000 of equity in my house, i would rather do a lender paid pmi.
how come i have never heard of this before? this would be a much better option for me. i plan on requesting it tomorrow, but are there certain qualifiers? i have an excellent credit score and have steady recession proof full time employement.
Hi troli,
Not all lenders are ready to give a lender paid private mortgage insurance (LPMI). You will have to speak to your lender regarding this and he will let you know whether or not he would help you in this regard. Your lender may require you to have a high credit score in order to get a LPMI.
Not all lenders are ready to give a lender paid private mortgage insurance (LPMI). You will have to speak to your lender regarding this and he will let you know whether or not he would help you in this regard. Your lender may require you to have a high credit score in order to get a LPMI.
can you elaborate on that "recession-proof" full time employment? i'm sure 10% of the population would love to hear about it.
troli
LPMI will also result in a higher interest rate which essentially makes your monthly payment the same as if you just had a lower rate plus PMI. The difference is how PMI and LPMI are handled on your tax returns. In addition, many lenders do not adjust your rate once you have paid the balance down below 80% LTV
LPMI will also result in a higher interest rate which essentially makes your monthly payment the same as if you just had a lower rate plus PMI. The difference is how PMI and LPMI are handled on your tax returns. In addition, many lenders do not adjust your rate once you have paid the balance down below 80% LTV
