DEFINITION of 'Lender-Paid Private Mortgage Insurance'

Private mortgage insurance that a mortgage lender pays on behalf of a borrower. Mortgage lenders generally require private mortgage insurance if a mortgage has a loan to value (LTV) ratio of more than 80%. When a lender pays the private mortgage insurance on behalf of the borrower, they do so in exchange for charging the borrower a higher interest rate. In other words, the borrower still pays for the private mortgage insurance, but does so in the form of a higher interest rate.

BREAKING DOWN 'Lender-Paid Private Mortgage Insurance'

The economics of the choice between paying private mortgage insurance, choosing lender paid private mortgage insurance, or using a second mortgage to avoid private mortgage insurance altogether is a function of how long borrowers estimates they will remain in a home or how long before they might refinance their mortgages and how quickly they estimate their home will appreciate.

To learn more about lender-paid private mortgage insurance, check out Why do I need to pay private mortgage insurance (PMI)?

RELATED TERMS
  1. Mortgage Insurance

    An insurance policy that protects a mortgage lender or title ...
  2. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  3. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  4. First Mortgage

    A mortgage in a first lien position on the property that secures ...
  5. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  6. Junior Mortgage

    A mortgage that is subordinate to a first or prior (senior) mortgage. ...
Related Articles
  1. Insurance

    How to Outsmart Private Mortgage Insurance

    It's possible to use a second mortgage to avoid this fee, but is it in your best interest?
  2. Insurance

    Why You Don’t Need Mortgage Protection Life Insurance

    Mortgage protection life insurance sounds great in concept - a guarantee that your mortgage will be paid off if you die unexpectedly. But take a hard look at what you get before choosing it.
  3. Personal Finance

    Shopping for a Mortgage? Use This Tool First

    As home-buying technology has progressed, the process of finding the best mortgage rates for 2016 can all be done online.
  4. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  5. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  6. Personal Finance

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  7. Financial Advisor

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
  8. Investing

    Understanding The Mortgage Payment Structure

    While a mortgage’s size and term set the baseline, the interest, taxes and insurance all influence the amount of the monthly payment.
  9. Investing

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  10. Personal Finance

    Mortgage Broker vs. Direct Lenders: Which Is Best?

    There are key differences between mortgage brokers and direct lenders. Here's how to choose which is best for you.
RELATED FAQS
  1. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
  2. When Is Mortgage Insurance Typically Required?

    Learn about the situations in which borrowers may be required to buy private mortgage insurance, and discover who this insurance ... Read Answer >>
  3. Why would a homebuyer need to take out PMI (private mortgage insurance)?

    Learn why some home buyers are required to take out private mortgage insurance (PMI), and how it affects the total monthly ... Read Answer >>
Hot Definitions
  1. Quadruple Witching

    The expiration date of various stock index futures, stock index options, stock options and single stock futures. All stock ...
  2. Co-pay

    A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
  3. Protectionism

    Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Demonetization

    Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
  6. Investment

    An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
Trading Center