How does lender-paid mortgage insurance compare to borrower-paid PMI?

With borrower-paid PMI, you pay a monthly premium that you can cancel once you reach 20% equity, which under federal law the servicer must automatically drop at 22%. With lender-paid mortgage insurance (LPMI), the lender covers the insurance in exchange for charging you a permanently higher interest rate. LPMI lowers your monthly payment slightly compared to a high PMI premium and the interest may be tax-deductible, but the higher rate never goes away, even after you cross 20% equity. Borrower-paid PMI is usually the better long-term choice if you expect to keep the loan and build equity, since you can eventually eliminate the cost. LPMI can win only if you plan to sell or refinance quickly.