Lender Paid Mortgage Insurance and Single Premium Mortgage Insurance are an interesting spin on mortgage insurance. They are options for home buyers to pay an upfront fee (single premium) or higher interest rate to the lender (lender paid) in exchange for the lender paying the insurance. Based upon the length of time you plan to be in your home, these can be great options to lower your monthly payment freeing up monthly cash flow, and they can even help you to qualify for a larger mortgage if income is a challenge.

But, there are a lot of things to consider before jumping in. For starters, this only applies to conventional loans, and mortgage insurance on conventional loans can be removed at any time after a loan drops below 78% LTV. So, if your home appreciates in value quickly after moving in, you could be eligible to get rid of the mortgage insurance completely, which drops your monthly payments. If you accept a higher interest rate in exchange for lender paid mortgage insurance, you will be paying that higher rate for the length of the mortgage, even if the house value goes up or you build equity into your home in other ways. Similarly, if you pay an upfront fee (single premium) for mortgage insurance, you generally will not be able to have that refunded, even if you would be eligible to drop mortgage insurance a year after purchasing your home.

It is also important to examine the tax implications of both options. Depending upon your personal tax situation, one might be more advantageous, and could severely impact the decision to go one way versus another. It is always recommended you consult a professional to learn the differences, and consult your accountant with that information.

All in all, lender paid mortgage insurance and single premium mortgage insurance are excellent options for many borrowers who are looking to lower their monthly payments. If you would like more information on lender paid mortgage insurance or single premium mortgage insurance, or  to see if they might benefit you, please contact me. And if you would like to add anything about lender paid mortgage insurance or single premium mortgage insurance, please leave a comment.