PAY ADVANTAGE ELIMINATES MONTHLY MORTGAGE INSURANCE AND INCREASES YOUR BUYING POWER
Lender-Paid Mortgage Insurance (LPMI) is usually available only on conventional loans. The idea behind LPMI is simple; all you need to do is to pay a percentage up front when you get your loan and you won’t be charged the traditional monthly PMI. LMPI is something you must qualify for and meet certain credit score criteria. Your lending specialists can determine if you qualify.
LPMI enables you (the borrower) to save a significant amount of money every month on your monthly mortgage payment. This form of mortgage insurance is available on refinance transaction up to the Loan-To-Value (LTV) of 95%.
LPMI enables you to put down as little as 5% on a new purchase and not the usual 20% down payment.
Apart from the lower monthly payment that LPMI offers, it can also qualify the borrower for a larger purchase price due to the low monthly payment.
Benefits of LPMI:
It helps homebuyers to purchase a home with as little as 5% down payment
The monthly mortgage payments will be lower
It can help borrowers to qualify for a larger amount of loan, thereby giving them access to bigger homes
Although the interest rate is slightly higher, the interest rate of LPMI is deductible
Is LPMI Right For You?
There are certainly pros and cons to LPMI, as with anything. Since LPMI is built into your interest rate, it remains the same for the life of loan, unless you refinance. Judging from the current rates, about 6 years will be required to reach an 80% LTV ratio through normal amortization if 10% is the down payment or about 8 years if you put 5% down. You can get there faster if the values of homes rise during that period.
Although LPMI can save you a significant amount on your monthly payment, this benefit can be temporary.
As a result, LPMI is ideal for those that do not plan to stay in the home for a long period of time.
Contact us today to help you make the right decision based on your situation.