PMI
Payment Options
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.
