Private mortgage insurance is required for borrowers of conventional loans with a down payment of less than 20% of the purchase price. Mortgage insurance is an insurance policy for the lender that provides coverage to the lender in the event that the borrower is unable to repay their mortgage.
There are several options for paying the premium:
Monthly Premium: The borrower pays the same amount every month until the loan balance is paid down to 78% of the initial property value, at which point the mortgage insurance payments end. There is no initial premium at closing.
Single Premium (Refundable): The borrower makes one lump sum payment at closing, but receives a partial refund if the loan is terminated within 5 years. There are no monthly payments.
Single Premium (Non-Refundable): The borrower makes one lump sum payment at closing. There are no monthly payments.
Single Premium (Lender Paid): The one-time lump sum payment is paid by the lender through a higher interest rate for the borrower.
Split Premium: The borrower pays a portion of the premium upfront and a portion in monthly payments.
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