For many mortgage professionals, mortgage insurance (MI) discussions begin and end with a monthly premium. The challenge is that focusing only on the monthly option can cause lenders to miss opportunities to better align financing with a borrower's goals. When affordability, qualification, or payment targets become obstacles, loan officers and lending teams need more tools available. One of the most underutilized solutions is Split Premium MI.
David Showalter, MI Education Specialist at Enact, explains how split premium MI is an overlooked secret weapon that helps loan officers win more deals, improve affordability, and create stronger borrower conversations. The key is choosing the MI structure that best meets your borrowers’ financial needs.
What is split premium mortgage insurance?
Split premium mortgage insurance is a hybrid of monthly MI and single premium MI.
Instead of paying the entire premium monthly or paying it all upfront at closing, the borrower pays a portion of the premium as a one-time payment at closing. In exchange, their ongoing monthly MI payment is reduced.
The amount of that monthly reduction depends on how much is paid upfront. With buy-down options (0.50%, 0.75%, 1.00%, 1.25%, 1.50%, and 1.75% of the loan amount) split premiums offer tremendous flexibility to match a borrower's financial goals and cash-to-close capabilities.
Like buying down an interest rate, a larger upfront contribution results in a lower monthly MI payment.
Not only does a split premium reduce today's monthly payment, but it can also reduce the cost of MI over the life of the loan. The exact savings vary based on each borrower's loan characteristics, but they can be substantial.
How split premium MI can help borrowers qualify
One of the most practical applications of Split Premium MI occurs when a loan is close to qualifying but debt-to-income (DTI) ratios are slightly too high. In these situations, even a modest split premium, like 0.50%, can reduce the monthly MI payment enough to help bring ratios within qualifying range.
For loan officers and processors, this creates another option before restructuring the loan or revisiting the borrower's homebuying plans.
Using seller and builder concessions more effectively
As seller and builder concessions become more common, mortgage professionals have an opportunity to help borrowers maximize those funds. Rather than allowing available concession dollars to go unused, borrowers may be able to apply them toward the upfront portion of a Split Premium MI structure.
This approach can create lasting value by reducing ongoing monthly MI costs while leveraging funds that are already available within the transaction. It’s another way to demonstrate strategic thinking and help borrowers get more from their financing package.
Never leave concession money on the table.
How split premium MI can help meet payment targets
For many borrowers, monthly payment matters more than purchase price. When a loan structure is close to a borrower's comfort zone but still exceeds their target payment, Split Premium MI can help narrow the gap.
Whether the difference is $75 or $100 per month, reducing the monthly MI payment may help make homeownership feel more manageable and increase borrower confidence in moving forward.
What you should know about QM considerations
The upfront portion of a split premium does count toward the Qualified Mortgage (QM) 3% points-and-fees limitation, so it's important to evaluate each file carefully.
However, because the maximum split option is 1.75%, you'll still have up to 1.25% available for other eligible points and fees. If necessary, simply choose one of the lower split options to remain within QM guidelines while still providing meaningful monthly savings to your borrowers.
Why split premium MI helps lenders stand out
Every borrower has different financial priorities, yet our industry often behaves as though monthly MI is the only option available.
Split premiums give you another tool to customize financing around your borrower's goals rather than forcing every borrower into the same solution. More importantly, it creates opportunities for higher-value conversations that position loan officers as trusted advisors rather than transactional providers.
Whether it improves affordability, supports qualification, or lowers payments, Split Premium MI can help lenders deliver more tailored borrower solutions.
>> Looking to strengthen your mortgage insurance expertise even further? Explore more insights from David Showalter and continue building a deeper understanding of MI fundamentals.
From product structures to strategic positioning, knowing the basics, and beyond, can help you better support borrowers, strengthen partnerships, and stay competitive in any market cycle.
The Enact advantage: empowering better MI decisions
At Enact, we believe MI should be a strategic tool, not a default assumption. By understanding how and when to present each MI option, mortgage professionals can deliver stronger advice and better borrower outcomes. Split Premium MI may be the most underutilized MI structure and strategy, but when making the best decision for your borrowers, it’s always important to look at the full picture.
We also offer a suite of tools: including Rate Express®, Underwriting Resources, and other training resources to further help you along the mortgage origination journey. Plus, you can always reach out to your Enact Sales Representative if you need an extra helping hand.
Source: David Showalter is a MI Education Specialist at Enact Mortgage Insurance who works closely with lenders and loan officer to support effective MI strategies and borrower education.
The statements in this article are solely the opinions of David Showalter and do not necessarily reflect the views of Enact or its management. Opinions expressed are for educational purposes only. Always review current, applicable agency guidelines and consult your compliance and legal advisors when exploring MI options.
Never miss a post by subscribing to Enact MI's Discover360℠ Blog! We’ll send you our most up-to-date topics right into your inbox.
