Mortgage Insurance Options: BPMI vs. LPMI (and the Ones In Between)

If you put less than 20% down on a conventional loan, you’ll pay for private mortgage insurance one way or another — but you usually get to choose how: borrower-paid monthly (BPMI, the default, and the structure federal cancellation rights are built around), lender-paid (LPMI, baked into a permanently higher rate), single-premium (one upfront payment), or split-premium (a hybrid of the two). Most buyers are never told this choice exists. They’re handed the monthly version, or — worse — sold a “no PMI!” loan without anyone explaining where the cost actually went. This article is about the structure decision itself. If you need a refresher on what PMI actually is and why lenders require it on low-down-payment conventional loans, start there. And if you already have monthly PMI, our guide on how to remove PMI covers the exit ramp.

Here’s the short version of the whole article: every one of these four structures pays for the same insurance policy. The only things that change are who writes the check, when, and whether you can ever stop paying. Get those three questions right and the decision mostly makes itself.

The four ways to pay for mortgage insurance

1. Borrower-paid monthly (BPMI) — the default

BPMI is what most people mean when they say “PMI”: a monthly premium added to your mortgage payment. On an illustrative $400,000 Colorado Springs purchase with 10% down — a $360,000 loan — a premium of 0.50% per year would run about $150 a month. (Illustrative only; actual MI pricing varies widely with credit score, down payment, and program — confirm current quotes.)

BPMI’s superpower is that it ends. Under the federal Homeowners Protection Act, you can request cancellation when your balance reaches 80% of the home’s original value, and your servicer must automatically terminate it when the balance is scheduled to hit 78% of that original value — as long as you’re current on payments. Lender-paid and single-premium structures come with no such right.

2. Lender-paid (LPMI) — the “no PMI” loan, decoded

With LPMI, the lender pays the insurance company — and recovers the cost by charging you a higher interest rate for the entire life of the loan. There’s no MI line item on your statement, which is why it gets marketed as “no PMI.” The insurance didn’t disappear. It moved into your rate, where you can’t see it and — critically — can’t cancel it. The Homeowners Protection Act’s cancellation and termination rights simply do not apply to lender-paid arrangements; the only way out of LPMI’s higher rate is to refinance or pay off the loan.

3. Single-premium — pay once, done monthly

Single-premium (sometimes “upfront”) MI is one lump payment at closing that covers the policy in full. On our illustrative $360,000 loan, that might be a one-time charge somewhere in the range of $5,400 to $7,200 (illustrative — pricing is credit- and program-sensitive). After that, no monthly MI at all, so your payment looks like a 20%-down payment. The catch: the money is spent. If you sell or refinance in year two or three, you generally don’t get a refund of the unused portion — the premium is typically non-refundable or only partially refundable. You prepaid for insurance coverage you never used.

4. Split-premium — the compromise

Split-premium is the hybrid: a smaller upfront payment at closing plus a reduced monthly premium. It’s less common, but it’s useful when you have some extra cash (or a seller credit) but not enough to fund a full single premium, and you want to shrink the monthly hit without betting the whole premium on staying put. Because its monthly portion is borrower-paid, it generally keeps the same federal cancellation rights as BPMI — though the upfront chunk, once paid, is spent (confirm the specifics with your servicer).

BPMI vs. LPMI at a glance

The head-to-head that matters most is BPMI versus LPMI, because LPMI is the one that gets sold hardest and explained least. Using the same illustrative $360,000 loan: BPMI adds roughly $150 a month that eventually goes away; LPMI adds nothing visible but raises your rate — and that higher rate keeps costing you after the point where BPMI would have hit its 80% cancellation threshold and dropped off. On a loan you hold for 10+ years, the crossover math tends to favor BPMI. On a loan you exit in 3–5 years, LPMI’s higher rate never has time to do much damage, and the lower payment along the way can win. Since the rate premium a lender charges for LPMI is itself a pricing decision, it helps to understand what determines your mortgage rate in the first place — the same levers (credit score, down payment, loan type) move both your base rate and your MI cost.

Four questions that should drive your choice

• How long will you actually hold this loan? Not the 30-year term — the realistic horizon before you sell or refinance. Short horizon favors LPMI or keeping it simple with BPMI; long horizon favors BPMI with early cancellation; single-premium needs a hold long enough to earn back the upfront cost.
• What’s your credit score? Private MI is aggressively credit-sensitive — the same coverage can cost dramatically more with a 640 score than a 760. That’s on top of the way your credit score affects your mortgage rate itself. Strong-credit borrowers get the cheap MI that makes LPMI and single-premium pencil; weaker-credit borrowers usually do best with cancellable BPMI, because their expensive premium is the one you most want the right to stop paying.
• Who’s funding it? A single premium doesn’t have to come out of your pocket. In many transactions, seller concessions can cover closing costs — and an upfront MI premium paid at closing can be part of that conversation. Fannie Mae’s interested-party contribution rules cap what sellers can chip in — generally 3% to 9% of the price on a primary residence, depending on your down payment. A seller-funded single premium can be one of the highest-leverage uses of a concession: it permanently deletes a monthly cost using someone else’s money. (Program rules apply — confirm current with your loan officer.)
• Do cancellation rights matter to you? They exist only on borrower-paid premiums — full BPMI or the monthly portion of a split. The CFPB’s guide to removing PMI spells out the requirements: a written request at 80% of original value, a good payment history, no junior liens, and possibly evidence the home hasn’t lost value — plus automatic termination at 78% and a final backstop at the loan’s midpoint. If El Paso County home values keep appreciating and you make your payments, that 80% request date can arrive years ahead of schedule. LPMI and single-premium buyers watch that party from the window.

FHA mortgage insurance is a different animal

Everything above describes private mortgage insurance on conventional loans. An FHA loan carries FHA mortgage insurance premiums (MIP) instead, and the rules are structurally different:

• Everyone pays it, regardless of credit score — there’s an upfront premium financed into most loans plus an annual premium paid monthly (rates are set by HUD — general, confirm current).
• It’s not credit-priced. FHA MIP costs roughly the same for a 640 borrower as a 780 borrower, which is exactly why FHA often wins for lower scores and conventional-with-PMI wins for higher ones.
• It usually doesn’t cancel. Under HUD policy for loans since mid-2013, putting down less than 10% means annual MIP runs for the life of the loan; 10% or more down trims it to 11 years (general — confirm current). The Homeowners Protection Act’s PMI cancellation rights do not apply to FHA loans. For most FHA borrowers, the practical exit from MIP is refinancing into a conventional loan once equity allows.

Our take

Our take: for most buyers who plan to stay put and build equity — through payments, appreciation, or both — plain monthly BPMI plus an aggressive eye on early cancellation beats LPMI, because the boring option comes with a federal off-switch. LPMI and single-premium are legitimate tools, not tricks, but they win in narrower lanes: strong credit, a confident 3-to-7-year hold, or a seller credit begging to be spent on a single premium. What we push back on is the framing. A loan advertised as having “no PMI” almost always has mortgage insurance — you’re just paying for it in a form you can’t see and can’t cancel. Any lender pitching LPMI should be willing to show you the same loan priced with BPMI, side by side, so you can see exactly what the “no PMI” convenience costs. That side-by-side habit is worth keeping for every quote you gather — here’s how to compare mortgage offers without getting lost in the fine print. And if you’d rather have someone run the four-way MI comparison for your actual numbers, that’s a routine morning’s work for a mortgage broker in Colorado Springs.

Frequently asked questions

Is a lender-paid MI loan really a “no PMI” loan? No. The insurance still exists and you still fund it — through a higher interest rate instead of a monthly line item. The honest comparison is the LPMI rate versus the BPMI rate plus its cancellable monthly premium over your realistic holding period.

Can I cancel LPMI once I reach 20% equity? No. The Homeowners Protection Act’s cancellation and automatic-termination rights apply to borrower-paid PMI only. With LPMI, the higher rate lasts as long as the loan does; refinancing is the only practical way to shed it.

Who can pay a single-premium policy? You can, and in many cases so can a seller (through concessions, within program caps) or a lender credit. Seller-funded single premiums are a popular negotiating strategy because they convert a one-time credit into a permanent monthly savings — confirm current program rules for your loan type.

Does my credit score change what mortgage insurance costs? On conventional loans, dramatically — private MI is priced on credit score, down payment, and other risk factors, so two neighbors with identical loans can pay very different premiums. FHA MIP, by contrast, is essentially flat across credit scores.

Is FHA MIP the same as PMI? No. PMI is private insurance on conventional loans with federal cancellation rights (for the borrower-paid version). FHA MIP is government-program insurance with an upfront and an annual premium, and for most borrowers putting less than 10% down it lasts the life of the loan (general — confirm current); the usual exit is refinancing to conventional.

719 Lending, NMLS #1601989. Equal Housing Opportunity. This article is educational only and is not financial or legal advice; program details and figures are general — confirm current. 719 Lending is not affiliated with or endorsed by any government agency. Last updated: July 2026.