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I have seen LPMI charged as a flat fee up front and I have also seen it charged in the form of increased interest rate. Are these both considered LPMI?
I am thinking of a 30 year fixed with LPMI built into it. Basically paying an extra .375 for the LPMI. On a 300K loan this works to about an extra $1100 in interest. But the alternative is to pay $1950 per year in PMI. Yes the PMI will stop after 7 years or so, but I would probably have to remain in the home for 15 years or more to do better with PMI. That is unlikely to happen. We make more than 100K so no PMI deduction.
It seems on the other hand that if you pay the LPMI upfront you will do worst with the shortest term stay and best with longest term stay. So if you stay 3 years paying LPMI upfront will not be a good idea, but at 30 years its a great idea.
So it seems that traditional PMI falls between paying LPMI upfront and rolling in LPMI over 30years.
DO I understand this correct. I thought the lender pays a lump sum for LPMI upfront. If they roll it into the loan and I only pay the higher interest rate for one year, won't the lender lose a ton of money on the insurance policy.
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