PMI or Private Mortgage Insurance is held on home loans when a borrower has less than 20% equity. Buyers always tell me, “I don’t have 20% to put down but I don’t want to pay PMI”, and my answer usually then involves me explaining the difference between Lender Paid MI and Borrower Paid MI.
Most borrowers are aware of the monthly paid mortgage insurance because that’s what people read about in the media or are told about from other homeowners. This extra monthly expense can be avoided by building it into the rate. If you have less than 20% to put down and want a lower interest rate you will have generally have to pay monthly MI. However, Lender Paid MI will allow the bank to absorb the cost of this mortgage insurance premium within the interest rate allowing the borrower to avoid the monthly payment forever. Although, this may give the borrower a slightly higher rate, it can often times keep the total monthly payment lower than the borrower-paid monthly options.
Each individual and borrower has a unique situation that deserves a unique approach and solution to their mortgage needs. Borrowers should review all options and weigh the benefits and possible drawbacks of the LPMI and BPMI options. I will help outline the details of each option and help you determine the best possible solution for your unique situation. Don’t be treated like a number; when you work with me you get treated like family.
Zach is a Mortgage Advisor with State Bank in Dublin, OH. He writes and speaks regularly on personal finance, business development, and leadership. His focused approach on educating clients through the mortgage process allows him to help hundreds of new homeowners each year.