Understanding Lender Paid Mortgage Insurance (LPMI)
With LPMI, your mortgage insurance premium is paid upfront in a single lump sum and the cost is passed onto you in the form of a slightly higher interest rate. With LPMI, your mortgage rate often is .25% -.375% higher, but the net effect is still a lower payment as compared to traditional mortgage insurance.
Tax advantage of LPMI
Choosing a LPMI mortgage offers many advantages over separate monthly due private mortgage insurance (MI), one being: monthly private mortgage insurance is not tax deductible! LPMI does not require monthly mortgage insurance and you get the write off of your full interest payments.
Thus, the higher interest rate you pay by doing the LPMI is tax deductible. Private mortgage insurance has been tax deductible in previous years, and the private mortgage insurance industry is lobbying to get the deduction extended, but it is not currently tax deductible.