Want to take advantage of the market’s lowest interest rates, but don’t have enough money to make a large enough downpayment to avoid private mortgage insurance? That’s what lender-paid mortgage insurance can help you do.
How lender-paid mortgage insurance works is your lender pays the mortgage insurance premium up-front (in a lump sum) and then charges you payments with a higher interest rate. This rate is usually one-quarter to half a percentage point higher.
The example below shows the difference borrower-paid mortgage insurance and lender-paid mortgage insurance, on multiple levels. The down payment is $25,000 and the borrowed amount is $225,000 with private mortgage insurance.