Single financed premium mortgage insurance, or single premium MI, is a method of paying for mortgage insurance where the entire premium is paid upfront at closing rather than in monthly installments. It’s most common with conventional loans when the borrower is making a down payment of less than 20%.
How it Works: Instead of paying a monthly mortgage insurance premium as part of your regular mortgage payment, the entire premium is calculated and added to your loan balance. This increased loan amount is then financed over the life of the mortgage.
Advantages of Single Financed Premium MI:
- Potentially Lower Overall Cost: Depending on how long you plan to stay in the home and the interest rate you secure, paying the premium upfront can sometimes be cheaper than paying monthly MI over the long term. This is because you avoid accumulating interest on the monthly premiums throughout the loan’s lifetime.
- Lower Monthly Payments: Because you’re not paying a separate monthly MI premium, your monthly mortgage payment is lower than it would be with monthly mortgage insurance. This can be appealing for those concerned about immediate affordability.
- Eliminates Monthly MI Hassle: You only have to deal with the MI premium once at closing, simplifying your monthly budgeting. You don’t have to track when you might reach 80% loan-to-value (LTV) and request MI cancellation.
Disadvantages of Single Financed Premium MI:
- Higher Loan Amount: Financing the premium increases your overall loan amount. This means you’ll pay interest on the MI premium for the life of the loan, even if you reach 80% LTV relatively quickly.
- Little to No Refund: If you refinance or sell your home soon after purchasing it, you’ll likely receive little to no refund of the upfront premium. This is a significant disadvantage if you don’t plan on staying in the home for a long period.
- Increased Interest Expense: Because the loan balance is larger, you’ll pay more interest overall throughout the life of the loan.
- Higher Closing Costs: While the monthly payment might be lower, your initial closing costs will be higher due to the upfront premium.
Is it Right for You?
Whether single financed premium MI is the right choice depends on your individual circumstances and financial goals. Consider the following:
- How long do you plan to stay in the home? If you plan to stay for a long time, the potential for lower overall cost might be appealing. However, if you anticipate moving or refinancing within a few years, monthly MI is likely a better option.
- What is your interest rate? A lower interest rate makes single premium MI more attractive as the interest paid on the financed premium will be less.
- Can you afford the higher closing costs? Ensure you have the funds available to cover the higher closing costs associated with the upfront premium.
- Compare your options: Request quotes for both single premium and monthly mortgage insurance and carefully compare the long-term costs and potential savings.
Consult with a mortgage professional to discuss your individual situation and determine the best mortgage insurance option for your needs.
768×512 mortgage insurance premium mip total mortgage blog from www.totalmortgage.com 
1099×832 single premium life insurance explained life ant from www.lifeant.com 
4901×3267 basic comparison private mortgage insurance mortgage from goldeneaglemortgagegroup.com 
300×171 single premium life insurance comprehensive guide lump sum from www.insuranceandestates.com 
765×432 single premium life insurance top pros cons spl from www.lifeinsuranceblog.net 
525×266 mortgage insurance premium from www.advisoryhq.com 
980×613 mortgage insurance premiums details from www.aotax.com 
800×800 single premium life insurance term life from wholevstermlifeinsurance.com 
750×339 single premium credit life insurance cb life insurance from cblife.com.mm 
1200×628 single premium insurance plans invest india from www.coverfox.com