icon Lender-Paid Single Premium: A QM-Eligible Option

Because the premium for Lender-Paid Mortgage Insurance (LPMI) is paid by the lender, no MI cost is included in the QM 3% cap on points and fees for borrowers. The cost of the MI coverage is built into the mortgage rate, resulting in a slightly higher interest rate for the borrower.

LPMI is a QM-friendly and versatile option that has benefits for both the borrower and the lender.

MI puzzle pieces

Borrower Benefits

  • LPMI often results in a lower monthly mortgage payment when compared to a borrower-paid monthly option.
  • No MI closing costs.
  • May have tax benefits compared to borrower-paid monthly, which is no longer tax deductible. (For tax advice, borrowers should check with a tax professional.)

Lender Benefits

  • Higher profit potential through secondary marketing execution based on a higher mortgage rate used to cover the up-front MI premium.
  • Enhanced servicing margins and income.
  • Can be sold as a "no-MI" loan.
  • LPMI is not included in QM points and fees calculations.
Borrower-Paid Monthly Lender-Paid Single

Monthly Payment

Up-front paid by lender

63 bps 232 bps

Interest Rate

Interest Rate

Total Monthly Payment

Total Monthly Payment

Monthly Payment Savings: $61.59

Assumptions: Base loan amount $200,000, two borrowers, both with 720 credit scores, 41% DTI, 30-year fixed-rate purchase loan, single-family house, stable market, 95% LTV.
Performance Premium pricing as of April 18, 2016.