| Private mortgage insurance can be paid on either an annual, monthly or
single premium plan. Premiums are based on the amount and terms of the mortgage and will vary according to loan-to-value ratio,
type of loan, and amount of coverage required by the mortgage company.
Under an annual plan, an initial one year premium is collected up front at closing, with monthly payments collected
along with the mortgage payment each month thereafter. Monthly plans allow a borrower to pay only 1 or 2 months worth of
premium at closing, and then on a monthly basis along with the regular mortgage payment. Under a single premium plan, the
entire premium covering several years is paid in a lump sum at closing. Typically, homebuyers choose to add the amount of the
mortgage insurance premium to the loan amount. By doing this, homebuyers can reduce their closing costs and increase their
interest deduction. |
