More on Your Mortgage Insurance Options

• Split Premium Insurance—In this option, the borrower purchases a portion of the insurance by either paying out of pocket or financing, and then pays a smaller amount on the monthly premium. Some find this option attractive because it offers flexibility for the homebuyer and the lender.  Mortgage payments may even be lower because the premium can be paid by a third party or at closing.  Borrowers may also benefit from a split premium tax write-off.

• Standard annual premium—This option requires that a certain amount be paid at closing, usually the total cost of the first year of insurance.  Some borrowers like the standard annual premium because they get the insurance cost out of the way in the first year, and the renewal in the second year and beyond often leads to lower monthly payments.  Some companies offer tax benefits for choosing this plan as well.

More thoughts

Remember, mortgage insurance is designed to get buyers into homes faster by avoiding a large down payment.  Keep in mind the following when you’re choosing a certain type of mortgage insurance:

• The home loan amount
• Estimated monthly payments
• Local housing trends

With careful consideration of your personal circumstance, along with the benefits and disadvantages of each type, you can choose the mortgage insurance that is right for your home.