For Everyone, Monthly Premiums Are Probably The Very Best Fit. Payments Are Regular, Then Cancel Out As The Loan Pays Down Over Time And As The Home Increases In Value.
For many leveraged borrowers, monthly or annual premiums are the best fit. Payments are fixed, then can be eliminated as the loan either pays down over time or as the home increases in value, or both.
Another option is called single premium, in which you pay a lump-sum payment at the time of closing. This pays your PMI policy, for as long as your mortgage is active.
Another option is lender-paid mortgageinsurance (LPMI) that requires no monthly payment whatsoever. But, your mortgage rate will be increased to offset the lender’s extra risk. Homeowners who wish to move or refinance within the first few years of the mortgage may find it advantageous to use lender-paid MI, which raises the mortgage rate by a small sum, but that requires no separate payment.
The third solution is monthly premiums, the most frequent way with which homeowners pay MI. The annual cost of insurance is divided by 12, and paid with every month’s mortgage payment. This is my favorite because a borrower can request cancellation of this premium when the loan-to-value goes to 78% or below.
Homeowners who plan to continue to keep their current loan and expect small home values increases might prefer the single premium option.