What is Lender Paid Mortgage Insurance (LPMI)? 

LPMI stands for lender paid mortgage insurance. It is an alternative to paying standard mortgage insurance when the loan to value (LTV) of a mortgage is greater than 80%.

When you choose an LPMI mortgage option, you do not pay the mortgage insurance typically required and the lender is the one that covers the costs. However, it is important to remember that even though you are not paying mortgage insurance, the LPMI mortgage option will have a higher interest rate than a mortgage with standard private mortgage insurance (PMI).

There are benefits to choosing a lender paid mortgage insurance option that might include:

• Lower overall payment with lender paid mortgage insurance
• Larger tax benefit

You cannot remove LMPI. That is one major drawback. With a conventional loan that has PMI, once your LTV reaches 80%, you can have the mortgage insurance removed. With an LPMI program, your LTV might drop below 80% however there is no mortgage insurance to remove and you will be stuck with the higher interest rate. The only option to lower your payment is to refinance into a new loan at or under 80% LTV.

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