If a loan is above 80% LTV, many Lenders require mortgage insurance. However, many of these lenders also have programs where they pay the mortgage insurance. Some Lenders even go as far as having programs where they discount the interest rate once the LTV reaches 80%, either by gained equity in the home, or payments made, or a combination of the two factors.

You can perform a simple cost comparision to determine if the lender paid mortgage insurance has a lower cost than going with a loan where you have to pay the insurance on your own.

Even when the Private Mortgage Insurance (PMI)is paid by the Lender there is a cost involved. The alternative to a mortgage with PMI is to do a first and second mortgage. Many times the cost of the first and second mortgage will be less than the cost of a single mortgage with a PMI premium. In other cases the situation will be reversed. Your Mortgage Professional will be able to determine which alternative will be the best and most beneficial for you.

Another advantage of Lender Paid Mortgage Insurance is tax deductibility. PMI normally is not tax deductible, but with lender paid mortgage insurance the cost of the PMI is absorbed into the interest rate. Most interest payments for a mortgage are tax deductible. Be sure to ask your accountant and your mortgage broker if Lender Paid Mortgage Insurance makes since for you.

 

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