Borrower Paid Single Premium Mortgage Insurance (SPMI) is a type of PMI Insurance available in both refundable and nonrefundable options. Single larger premium payments are made at the closing table and advantages include:
- Lower monthly payment – The absence of a monthly MI payment often provides a lower monthly payment than Monthly or Split Premiums afford
- Flexibility – The borrowers, seller, builder, or other third party can pay the premium at closing. Lenders may offer a lender credit to cover the cost of the premium. The borrowers can opt to finance the premium into the loan amount. (While base LTV is used to determine MI coverage requirements, financing the premium into the loan amount may increase the total LTV/CLTV.)
- Cancellable – Borrowers can request cancellation based on investor requirements or under the Homeowners Protection Act of 1998 (HPA); lenders must automatically cancel under HPA terms.
- Refundable – Borrowers who select refundable single premiums may receive a refund if they cancel MI within the first 5 years of coverage. Even those who select the nonrefundable option may be eligible for a refund if they or their lender cancel MI under the HPA
Who should consider Borrower Paid Single Premium Mortgage Insurance (SPMI)?
Borrowers who want to:
- Minimize their monthly payment, even if it means paying more at closing or increasing their debt by financing the premium into the loan amount
- Get the seller or builder to pay the premium – especially in a buyer’s market
- Qualify for MI cancellation sooner by making extra payments that reduce the mortgage balance ahead of the original amortization schedule or home improvements that result in an increase in the appraised value
