Lender-Paid Private Mortgage Insurance

AAA

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.

INVESTOPEDIA EXPLAINS '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. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Forced Place Insurance

    The insurance that a lien holder places on a property, to provide ...
  4. Mortgage Insurance

    An insurance policy that protects a mortgage lender or title ...
  5. Up-Front Mortgage Insurance - UFMI

    An insurance premium that is collected, typically on Federal ...
  6. Mortgagor

    An individual or company who borrows money to purchase a piece ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  3. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  4. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  5. Insurance

    Top 5 Car Insurance Companies in Florida

    Learn which car insurance companies lead the Florida market in terms of market share and new premium dollars, and discover which companies are growing fastest.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares US Real Estate

    Learn about the iShares US Real Estate fund, which holds shares of equity and nonequity real estate investment trusts incorporated in the United States.
  7. Professionals

    What Kind of Insurance Do RIAs Need?

    Advisors spend a lot of time discussing insurance with clients but they also need to consider their own coverage needs as small-business owners
  8. Credit & Loans

    Schedule Loan Repayments with Excel Formulas

    Calculate all the particulars of a loan using Excel, and set up a schedule of repayment for a mortgage or any other loan.
  9. Credit & Loans

    What Qualifies as a Nonperforming Asset?

    A nonperforming asset is a loan made by a financial institution to a borrower who has failed to make any scheduled payments for at least 90 days.
  10. Credit & Loans

    Avoiding Red Flags with Online Mortgage Lenders

    Using an online mortgage lender can be convenient, but how do you know you can trust one? Follow these tips to make sure the lender is legit.
RELATED FAQS
  1. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>
  2. What risks do I face when investing in the insurance sector?

    Like all equity investments, insurance companies present investors with market risk. Insurance companies, like banks, also ... Read Full Answer >>
  3. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  4. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  5. Is it more important to have a low deductible or a low premium?

    The choice between a low deductible or a low premium is a personal one. There is no right or wrong arrangement, but there ... Read Full Answer >>
  6. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!