Monthly Premium Borrower Paid Mortgage Insurance (BPMI) is the most common type of PMI Insurance, making up the most widely accepted premium plan in mortgage banking. This is due to their simplicity and ease of use. In fact, many lenders will not even discuss the other options unless you bring them up so being an educated consumer is important. Some advantages to BPMI include:
- Little money due at closing – The lender usually just requires a 2-3 month payment at closing
- 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
- Lower monthly payment upon cancellation – If MI is canceled, the borrower’s monthly mortgage payment is reduced by the monthly premium amount
- Build equity faster – With no premium financed into the loan amount and no increase to their interest rate, borrowers are able to build equity more quickly than with other premium plans
Who should consider Borrower Paid Mortgage Insurance Monthly Premiums?
Borrowers who want to:
- Minimize closing costs
- 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
- Lock in the lowest interest rate now and a lower monthly payment without refinancing
- Refinance, but whose appraised value was lower than expected and LTV is slightly above 80%
