What Is Single Premium Mortgage Insurance?

Mortgage insurance is an insurance policy which compensates the lender for losses in the event of a default on a mortgage loan. Private mortgage insurance is typically required when down payments are below 20%. Rates vary based upon loan factors such as the percent of the loan insured, loan-to-value (LTV), fixed or variable, and credit score. The rates may be paid in a single lump sum, annually, monthly, or in some combination of the two (split premiums). This blog will be discussing the single premium option and why this is valuable to a home buyer.

At Intercoastal Mortgage Company we offer multiple types of loans, and lender-paid insurance policies. The mortgage insurance we offer is designed to protect the buyer and the lender alike. The benefit of mortgage insurance to you (the buyer) is that you are afforded the ability to own a home when you don’t have the standard 20% down payment. Single premium mortgage insurance is one of the many ways we can offer insurance coverage to suit your specific needs.

Single premium mortgage insurance is a one-time, lump sum that is typically paid at closing. When you have less than 20% to put down on a house, the premium to cover the gap may be financed into the interest rate. Financing the one-time premium has positive outcomes; it lowers the monthly cost of the insurance, and provides a tax deduction as an additional interest expense to the borrower. This buys you out of monthly mortgage insurance for the lifetime of the loan. Single premium is also cheaper than monthly payments when compared over time.

Single premium mortgage insurance (or upfront mortgage insurance) is available on most loans that require private mortgage insurance.  It can be paid by the seller or lender as a closing cost contribution. The seller can offer a percentage (3% for example) that will cover a non-refundable premium for the borrower, who will then never have to make a mortgage insurance payment.

With a smaller fee added into the closing cost, you can eliminate any extra monthly cost and still benefit from having an insured mortgage and ultimately getting your loan. At Intercoastal Mortgage Company we specialize in offering the right loan for our clients. Contact me for any additional information or to get the process of home ownership started.