Borrower Paid Split Premium Mortgage Insurance is a type of PMI Insurance that gives you the option of paying part of the MI premium upfront, in order to reduce the monthly MI premium paid along with their mortgage payment. This is similar to FHA loans. Advantages include:
- Multiple upfront options – MI companies offer various options to allow you to custom-fit the right option for you– unlike FHA’s upfront premium, where one size fits all
- Flexibility – The borrowers, seller, builder, or another 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.)
- Monthly portion is cancellable – Borrowers can request cancellation on the monthly portion of the split premium based on investor requirements or under the Homeowners Protection Act of 1998 (HPA); lenders must automatically cancel under HPA terms. Learn more
Who should consider Borrower Paid Split Premium Mortgage Insurance?
Borrowers who want to:
- Reduced their monthly mortgage payment
- Get the seller or builder to pay the upfront portion – especially in a seller’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
