When considering LPMI, use a mortgage calculator to create an amortization schedule, and see what year your mortgage LTV will reach 78 percent. It never goes down, and it never goes away - unless you pay off the loan. However, LPMI is built into your mortgage interest rate. ![]() Monthly borrower-paid PMI coverage gets cheaper over time as your loan balance is paid down, and it drops off altogether when your loan-to-value (LTV) reaches 78 percent. LPMI comes with some disadvantages, however. After taxes, LPMI might be a better deal for you. ![]() Finally, if your adjusted gross income exceeds $54,500 ($109,000 for married couples filing jointly), PMI is not tax deductible, while mortgage interest is. You'll want to compare the mortgage payment with LPMI to the mortgage payment with monthly borrower-paid PMI and see which one is better. This might allow you to purchase a more expensive home, or simply reduce your costs. Depending on how much of the single premium savings your lender passes on to you, your monthly costs can be significantly lower. For a 90 percent loan to a borrower with a 740 FICO, lender-paid mortgage insurance (LPMI) premium is 2 percent. But what if you don't have the money? Mortgage insurers allow the lender to pay it for you. You can see how the single premium might be much cheaper after about four years. According to mortgage insurer Genworth, a borrower with 10 percent down and a 740 FICO score pays 0.41 percent of the mortgage balance per year, or a one-time premium of 1.29 percent of the initial loan amount. However, it can also be paid in a single premium, upfront. Most people pay PMI in monthly installments. In most cases, term payments are significantly higher than tenure payments, because the lender does not know how long you'll be in the house, and must therefore be conservative with your loan amount.Find a Lender Offering Lender-Paid Mortgage Insurance Matt and Cindy have two monthly payment options - "tenure" payments for life or "term" payments for a specific time period - in their case, the ten years in which they expect to occupy the home. They're 73 and 70 and expect to live in their home 10 more years. Their Social Security income is only about $3,000 a month, and some extra income would really improve their lifestyle. Their home, which they own free and clear, is worth $400,000. Matt and Cindy are house-rich and cash-poor. Now let's look at a situation where the homeowners are house-rich and cash-poor.ĮXAMPLE WHERE THE REVERSE MORTGAGE DECISION IS BASED ON REMAINING TIME IN HOME ** If unused, HECM credit lines grow at the loan's variable interest rate. *Elimore's property may be worth $300,000, but it's subject to a $80,000 loan. Unused, the line of credit will grow over time.
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