Lenders Mortgage Insurance

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Lenders mortgage insurance (LMI), which is also referred to as private mortgage insurance, is a type of coverage that benefits the lender of a mortgage. Lenders mortgage insurance prevents the lender from losing all of its investment if the borrower cannot repay his loan. In most cases, mortgage lenders require borrowers to pay for this type of insurance if they make down payments of less than 20 percent on their mortgages.

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The good thing about LMI, also known as Private Mortgage Insurance (PMI), is that it makes it possible for you to purchase a house with as little as a 3-5% down payment, instead of waiting for years to come up with large amounts of money. The catch is, once you have the house, it no longer benefits you. The insurance is basically an additional cost to the borrower for the increased risk held by the lender. It is important to track down your payments and request cancellation of the PMI premiums when the loan-to-value ratio hits 80%.