Mortgage Insurance is often required when the amount of money you borrow exceeds 80% of the value of your home.

Mortgage insurance premiums can now be tax deductible, starting with the 2007 tax year, so consult an accountant and your loan officer to find out if LPMI is the right way to go. By having the lender pay these premiums, you may give up the tax deduction.

Until very recently, the only way to borrow more than 80% of the value of your home was to pay an extra mortgage insurance premium each month on top of your regular mortgage payment, or to arrange for a "combo loan", commonly called an "80/20"

Lender Paid Mortgage Insurance allows the lender to pay any applicable mortgage insurance premium directly, which means all you need to pay is your one mortgage payment, instead of one mortgage and one insurance payment or two separate mortgage payments.

In order to obtain LPMI, Lender Paid Mortgage Insurance, instead of traditional Private Mortgage Insurance your interest rate will be increased slightly. By paying a little higher interest rate and no mortgage insurance, you will save money from your monthly mortgage payment as opposed to if you were to obtain a loan that had PMI added on to your payment.

In addition to the common 80/20 loan, many lenders now offer a 75/25 mortgage program, which usually has a slightly lower interest rate.

Ask your mortgage consultant to print out a comparision of Lender Paid MI, Regular MI, and 80/10-20% financing to decide which program works best for you. There is an household income limit for allowing MI to be fully tax deductible of 100k. Consult with your tax advisor as well.

 

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