Borrower paid mortgage insurance is insurance that protects the mortgage lender against some or all of the loss caused by a default on a mortgage loan. Lenders usually require borrower paid mortgage insurance for borrowers with a down payment of less than 20% of the home purchase price. The borrower is required to pay the mortgage insurance premium for private mortgage insurance.
Advantages of Borrower Paid Mortgage Insurance
Borrower paid mortgage insurance allows lenders to underwrite what they consider to be a high risk loan, but without the risk. Borrower paid mortgage insurance also allows borrowers who don’t have a large down payment to be able to purchase a home. A home buyer who pays borrower paid mortgage insurance may be able to purchase a home with as little as a 3% down payment. Another advantage is that your monthly mortgage payment will be lower when the mortgage insurance is no longer required.