LENDER PAID MORTGAGE INSURANCE INITIAL DISCLOSURE
LENDER PAID MORTGAGE INSURANCE INITIAL DISCLOSURE
Borrowers: _______________________________________________________________ Date: _________________________
Property Address: _________________________________________________________________________________________
Loan number: ___________________________________ Lender: _C_i_ti_z_e_n_s_B__a_n_k_,_N__.A__._____________________________
You have applied for a mortgage loan that requires private mortgage insurance (PMI). PMI protects lenders and others against financial loss when borrowers default. Your loan will have lender paid mortgage insurance (LPMI).
LPMI differs from borrower paid mortgage insurance (BPMI) in several ways. Each form of insurance has advantages and disadvantages.
First, LPMI may not be cancelled by you, the borrower. By contrast, borrowers may be able to cancel BPMI on either 1. The date the principal balance of the loan is first scheduled to reach 80% of the original value of the property, or 2. The date the principal balance actually reaches 80% of the original value of the property. In addition, assuming the borrower is current on payments, BPMI automatically terminates on the date the principal balance of the loan is first scheduled to reach 78% of the original value of the property.
Second, LPMI usually results in a loan with a higher interest rate than one with BPMI, and terminates only when the loan is refinanced, paid off or otherwise terminated.
Third, LPMI may be tax deductible for purposes of federal income taxes if you itemize deductions on your return. Consult your tax advisor for details.
The following generic analysis reflects the differing costs and benefits of LPMI and BPMI over a 10-year period, assuming prevailing interest and property appreciation rates:
Assume a 30-year, fixed rate loan with initial principal balance of $90,000
BPMI
LPMI
Interest rate
7.00%
7.50%
Monthly Principal and Interest Payment
$598.77
$629.29
Mortgage Insurance Premium
$39.00
$0.00
Monthly Principal and Interest Payment with PMI
$637.77
$629.29
In the above example, the BPMI could be dropped after the 101st payment if all payments were made on time. The LPMI could not be dropped, although there may be tax deductions available relating to LPMI premiums (consult a tax advisor). After 10 years (120 months), the total of the monthly payments made and the principal balance under the different programs would be:
Total of Monthly Payments (including MI) Unpaid balance
BPMI $75,791 $77,232
LPMI $75,515 $78,116
I/we have received a written copy of the amortization schedule along with a copy of this disclosure.
Borrower:
Borrower:
LPMI Initial Disclosure Last Reviewed: 12/22/2020 Last Revised: 12/22/2020
Date: Date:
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