{"id":104396,"date":"2025-11-21T15:31:20","date_gmt":"2025-11-21T23:31:20","guid":{"rendered":"https:\/\/www.redfin.com\/blog\/?p=104396"},"modified":"2025-11-21T15:31:46","modified_gmt":"2025-11-21T23:31:46","slug":"lender-paid-mortgage-insurance-lpmi-and-how-does-it-work","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/blog\/lender-paid-mortgage-insurance\/","title":{"rendered":"Lender-Paid Mortgage Insurance (LPMI): What It Is, How It Works &#038; Whether It\u2019s Worth It"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">If you&#8217;re planning to buy a home with less than 20% down\u2014whether you\u2019re browsing a<\/span><a href=\"https:\/\/www.redfin.com\/city\/16163\/WA\/Seattle\" data-wpel-link=\"exclude\"> <span style=\"font-weight: 400;\">house for sale in Seattle, WA<\/span><\/a><span style=\"font-weight: 400;\"> or checking out a<\/span><a href=\"https:\/\/www.redfin.com\/city\/30818\/TX\/Austin\" data-wpel-link=\"exclude\"> <span style=\"font-weight: 400;\">home in Austin, TX<\/span><\/a><span style=\"font-weight: 400;\">\u2014you\u2019ll likely encounter mortgage insurance in some form. Most buyers are familiar with borrower-paid mortgage insurance (BPMI), the monthly PMI you pay until you reach 20% equity. But there\u2019s another option your lender may offer: Lender-Paid Mortgage Insurance (LPMI).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">LPMI can lower your monthly payment and eliminate monthly PMI charges, but it comes with long-term trade-offs. This Redfin article breaks down how LPMI works, how it compares to traditional PMI, who it\u2019s best for, and how to decide if it makes sense for your situation.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">What is lender-paid mortgage insurance (LPMI)?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Lender-paid mortgage insurance (LPMI) is when the lender pays your mortgage insurance premium upfront on your behalf so you don\u2019t have a monthly <\/span><a href=\"https:\/\/www.redfin.com\/blog\/what-is-pmi-insurance\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">PMI payment<\/span><\/a><span style=\"font-weight: 400;\">. In exchange, the lender charges you a higher interest rate for the life of the loan.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">LPMI is essentially \u201cbuilt into\u201d your mortgage rate. You save on monthly PMI, but you pay more in interest over time.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">How LPMI works<\/span><\/h2>\n<p><b>LPMI can be structured in two main ways:<\/b><\/p>\n<h3><span style=\"font-weight: 400;\">1. Single-premium LPMI (most common)<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The lender pays a one-time upfront PMI premium, and you take on a slightly higher interest rate.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">2. Lender-financed LPMI<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The lender finances the cost into the loan or adjusts the rate even higher to cover ongoing premiums.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Regardless of structure, both forms of LPMI ultimately raise your interest rate to cover the cost. It comes down to a trade-off:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">No monthly PMI costs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">But a permanently higher mortgage rate<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">What is borrower-paid PMI (BPMI)?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Before comparing LPMI and BPMI, it\u2019s helpful to understand how traditional PMI works.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Borrower-paid PMI (BPMI) is the standard form of <\/span><a href=\"https:\/\/www.redfin.com\/blog\/what-is-mortgage-insurance\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">mortgage insurance<\/span><\/a><span style=\"font-weight: 400;\"> most buyers pay when they put less than 20% down on a conventional loan. With BPMI:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The borrower pays a monthly PMI fee, added to the mortgage payment<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The cost depends on credit score, loan type, and down payment<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">PMI can be removed later, usually when you reach 20% equity<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It offers lower interest rates because PMI is not built into the rate<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">This is the type of PMI most homebuyers encounter\u2014it&#8217;s a separate line item on the monthly mortgage bill until the loan reaches a certain equity threshold. In some cases, you may be able to request PMI removal earlier with a new <\/span><a href=\"https:\/\/www.redfin.com\/blog\/home-appraisal\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">appraisal<\/span><\/a><span style=\"font-weight: 400;\">, depending on your lender\u2019s guidelines. Once removed, you continue paying the same lower interest rate.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">LPMI vs. Borrower-Paid PMI (BPMI)<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Here\u2019s how LPMI stacks up against the more traditional PMI option most buyers encounter:<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Feature<\/b><\/td>\n<td><b>LPMI<\/b><\/td>\n<td><b>BPMI (traditional PMI)<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Who pays the premium?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Lender (cost baked into your rate)<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Borrower (monthly fee)<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Monthly PMI payment<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes, until 20\u201322% equity<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Interest rate<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Higher<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Lower<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Ability to remove PMI<\/span><\/td>\n<td><span style=\"font-weight: 400;\">No\u2014rate stays higher forever<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Yes\u2014can cancel at 20% equity<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Good for lower payments upfront?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Possibly, depending on PMI cost<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Depends on PMI cost<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">Better long-term savings?<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Typically no<\/span><\/td>\n<td><span style=\"font-weight: 400;\">Usually yes<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">In most scenarios, BPMI is more cost-effective over the life of the loan, while LPMI can be beneficial short term if you&#8217;re focused on monthly affordability.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Example: LPMI vs. BPMI Cost Comparison<\/span><\/h2>\n<p><b>Scenario:<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">$450,000 purchase price<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">5% down ($22,500)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">30-year fixed mortgage<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Buyer has good credit<\/span><\/li>\n<\/ul>\n<p><b>With BPMI<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interest rate: <\/span><b>6.5%<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Monthly PMI: <\/span><b>$140\u2013$200<\/b><span style=\"font-weight: 400;\"> depending on credit<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">PMI drops once you reach ~20% equity (approx. 5\u20138 years)<\/span><\/li>\n<\/ul>\n<p><b>With LPMI<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interest rate: <\/span><b>6.875%<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">No monthly PMI<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Higher rate increases interest paid over time<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">No ability to remove the higher rate<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">In the first 2\u20133 years, the LPMI option may slightly reduce monthly costs, but not always\u2014your PMI rate determines whether LPMI actually lowers the payment. Over the life of the loan, BPMI almost always wins financially.<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">Use <\/span><\/i><a href=\"https:\/\/www.redfin.com\/mortgage-calculator\" data-wpel-link=\"exclude\"><i><span style=\"font-weight: 400;\">Redfin\u2019s mortgage calculator<\/span><\/i><\/a><i><span style=\"font-weight: 400;\"> to estimate how PMI affects your monthly payment and compare it with a higher-rate loan scenario.<\/span><\/i><\/p>\n<h2><span style=\"font-weight: 400;\">Pros and cons of LPMI<\/span><\/h2>\n<p><b>Pros<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>No monthly PMI payment<\/b><span style=\"font-weight: 400;\"> \u2014 reduces your upfront housing costs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Potentially lower monthly payment <\/b><span style=\"font-weight: 400;\">compared to loan with BPMI<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>May help you qualify more easily<\/b><span style=\"font-weight: 400;\"> since the monthly debt load is smaller<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Simpler payment structure<\/b><span style=\"font-weight: 400;\"> with everything rolled into the mortgage rate<\/span><\/li>\n<\/ul>\n<p><b>Cons<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Higher interest rate<\/b><span style=\"font-weight: 400;\"> for the entire life of the loan<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>No option to remove PMI<\/b><span style=\"font-weight: 400;\"> \u2014 you can\u2019t drop the higher rate once you hit 20% equity<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Likely more expensive long-term<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Refinancing may be needed<\/b><span style=\"font-weight: 400;\"> to eliminate the higher rate<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">When LPMI might be a good choice<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">LPMI can make sense if:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You want the <\/span><b>lowest monthly payment right now<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You\u2019re confident you\u2019ll <\/span><b>refinance within a few years<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You don\u2019t plan to keep the mortgage long-term<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You need lower DTI to qualify for the loan<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You prefer a predictable, all-in monthly payment without PMI charges<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">When LPMI is not a good idea<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">LPMI is usually NOT the right choice if:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You plan to stay in the home long term<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You want the ability to remove PMI later<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">You prefer lifetime savings over short-term savings<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Your credit score qualifies you for <\/span><b>low-cost monthly PMI<\/b><span style=\"font-weight: 400;\"> (often cheaper than LPMI)<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">How to decide if LPMI is worth it<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Before choosing LPMI, ask yourself:<\/span><\/p>\n<ul>\n<li aria-level=\"1\"><b>How long will I keep this mortgage? <\/b><span style=\"font-weight: 400;\">If you expect to <\/span><a href=\"https:\/\/www.redfin.com\/blog\/when-to-refinance-mortgage\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">refinance or sell<\/span><\/a><span style=\"font-weight: 400;\"> within a few years, LPMI may help you save short-term cash.<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-level=\"1\"><b>What\u2019s my PMI cost?<\/b><span style=\"font-weight: 400;\"> If your PMI quote is low (especially with strong credit), BPMI is usually better<\/span><\/li>\n<\/ul>\n<ul>\n<li aria-level=\"1\"><b>Do I care more about monthly affordability or long-term cost?<\/b><\/li>\n<\/ul>\n<ol>\n<li style=\"list-style-type: none;\">\n<ol>\n<li style=\"list-style-type: none;\">\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">LPMI = lower monthly payment now<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">BPMI = likely lower overall cost<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<ul>\n<li aria-level=\"1\"><b>Can I qualify more easily with LPMI?<\/b><span style=\"font-weight: 400;\"> No PMI may improve debt-to-income ratios.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">Alternatives to LPMI<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">If you\u2019re trying to avoid or reduce PMI, here are other paths:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Split-premium PMI:<\/b><span style=\"font-weight: 400;\"> Pay part of PMI upfront and part monthly.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Single-premium BPMI (borrower-paid):<\/b><span style=\"font-weight: 400;\"> You pay a single upfront PMI fee without raising the interest rate.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Putting 20% down:<\/b><span style=\"font-weight: 400;\"> The only way to <\/span><a href=\"https:\/\/www.redfin.com\/blog\/how-to-avoid-pmi\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">avoid PMI<\/span><\/a><span style=\"font-weight: 400;\"> completely.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Piggyback loan (80\/10\/10): <\/b><span style=\"font-weight: 400;\">Second mortgage reduces PMI need, but comes with its own costs.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">Frequently asked questions about lender-paid mortgage insurance<\/span><\/h2>\n<h3><span style=\"font-weight: 400;\">1. Can you remove LPMI?<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">No. Because the cost is built into the rate, the only way to eliminate it is to refinance.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">2. Does LPMI require good credit?<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Yes. Rates adjust based on credit, and LPMI can get expensive for borrowers with lower scores.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">3. Is LPMI available on FHA or VA loans?<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">No. LPMI applies to conventional loans only.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">4. Does LPMI affect closing costs?<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Not directly\u2014cost is built into the rate rather than paid upfront.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>LPMI lets you skip monthly PMI in exchange for a higher interest rate. Learn how lender-paid mortgage insurance works and whether it\u2019s the right choice for you.<\/p>\n","protected":false},"author":562,"featured_media":101859,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[34277],"tags":[34642],"coauthors":[34346],"class_list":["post-104396","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-mortgage"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.7 (Yoast SEO v27.9) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>What Is LPMI? 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