"Lender-paid mortgage insurance (LPMI) is when the lender pays your mortgage insurance premium upfront on your behalf so you don't have a monthly PMI payment . In exchange, the lender charges you a higher interest rate for the life of the loan. LPMI is essentially "built into" your mortgage rate. You save on monthly PMI, but you pay more in interest over time."
"LPMI can be structured in two main ways: 1. Single-premium LPMI (most common) The lender pays a one-time upfront PMI premium, and you take on a slightly higher interest rate. 2. Lender-financed LPMI The lender finances the cost into the loan or adjusts the rate even higher to cover ongoing premiums. Regardless of structure, both forms of LPMI ultimately raise your interest rate to cover the cost. It comes down to a trade-off:"
Lender-paid mortgage insurance (LPMI) occurs when the lender pays the mortgage insurance premium upfront and charges a higher interest rate for the life of the loan. LPMI is commonly structured as a single-premium LPMI or as lender-financed LPMI that rolls the cost into the loan or further raises the rate. LPMI eliminates monthly PMI payments and lowers the immediate monthly payment but increases the mortgage interest rate permanently, raising long-term interest costs. Traditional borrower-paid PMI (BPMI) requires monthly premiums until 20% equity is reached. Choosing between LPMI and BPMI depends on expected time in the loan, refinance plans, and sensitivity to monthly versus lifetime costs.
Read at Redfin | Real Estate Tips for Home Buying, Selling & More
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