## What is Lenders Mortgage Insurance (LMI)?
Lenders Mortgage Insurance (LMI) is a type of insurance that protects lenders against the risk of borrowers defaulting on their mortgages. LMI is typically required for borrowers who make a down payment of less than 20% of the purchase price of a home.
### How does LMI work?
When a borrower gets a mortgage, the lender will typically require them to pay for LMI. The cost of LMI is typically added to the loan amount and is paid over the life of the loan. If the borrower defaults on their mortgage, the LMI will pay the lender the amount of the loan that is unpaid.
### Who needs LMI?
LMI is typically required for borrowers who make a down payment of less than 20% of the purchase price of a home. This is because lenders consider borrowers who make a small down payment to be at a higher risk of default.
### What are the benefits of LMI?
There are a number of benefits to LMI, including:
* **It allows borrowers to get a mortgage with a lower down payment.** This can make it easier for borrowers to buy a home, even if they don’t have a lot of savings.
* **It protects lenders against the risk of borrowers defaulting on their mortgages.** This can help lenders to keep their interest rates low.
* **It helps to promote homeownership.** By making it easier for borrowers to get a mortgage, LMI can help to increase the number of homeowners in the United States.
### What are the drawbacks of LMI?
There are also a few drawbacks to LMI, including:
* **It can increase the cost of a mortgage.** The cost of LMI is typically added to the loan amount, which can increase the monthly payments.
* **It can delay the time it takes to pay off a mortgage.** Because the cost of LMI is added to the loan amount, it can take longer to pay off the loan.
* **It can make it more difficult to refinance a mortgage.** If a borrower wants to refinance their mortgage, they may have to pay for LMI again.
### Is LMI right for me?
Whether or not LMI is right for you depends on your individual circumstances. If you are considering getting a mortgage, you should talk to your lender to see if LMI is right for you.
## Here are some additional things to consider when making a decision about LMI:
* **Your down payment amount.** The amount of your down payment will determine whether or not you need LMI. Generally, borrowers who make a down payment of less than 20% will need LMI.
* **Your credit score.** Your credit score will also affect whether or not you need LMI. Borrowers with good credit scores are less likely to need LMI.
* **The loan amount.** The amount of the loan you are getting will also affect whether or not you need LMI. Borrowers who are getting a large loan amount are more likely to need LMI.
* **The type of mortgage you are getting.** Some types of mortgages, such as FHA loans, do not require LMI. However, other types of mortgages, such as conventional loans, may require LMI.
If you are considering getting a mortgage, you should talk to your lender to learn more about LMI and to see if it is right for you.