When buying a home with less than a 20% down payment, mortgage insurance (MI) is often part of the process. What many homebuyers don’t realize is that there are several ways to structure this cost. In this Discover360℠ series, we’ll break down each option, but here we’ll focus specifically on the most common: monthly mortgage insurance.
That’s where our MI expert David Showalter, Sales Account Manager at Enact, will dive in and share the key advantages of monthly mortgage insurance and how it can be a helpful tool in your MI strategy. His perspective helps those of us in the industry clearly articulate monthly MI’s value—both internally and to borrowers. After all, 64% of Americans still think that they need 20% for a down payment, according to a 2026 NerdWallet Report.
MI confusion slows borrower decisions
For borrowers putting down less than 20%, mortgage insurance is often required—but how it’s structured isn’t always well understood. Too often, MI is treated as a fixed cost rather than a strategic choice. That knowledge gap can slow conversations, create uncertainty at the point of sale, and limit your ability to guide borrowers toward the structure that best supports their goals.
Across today’s market, borrowers are presented with multiple MI options. Yet most still default to monthly mortgage insurance—often without fully understanding why it works, who it benefits most, or how it fits into the overall loan strategy. For lenders, loan officers, processors, and operations teams, clarity on monthly MI is essential to keeping deals moving efficiently.
When MI goes unexplained, we all pay
When borrowers hear “mortgage insurance,” they typically think of an extra monthly fee, without context on flexibility, cancellation, or long-term impact. If lenders don’t proactively explain monthly MI, borrowers may assume it’s a permanent cost or overlook how it compares to single- or split-premium options.
That misunderstanding can lead to hesitation at application, resistance at closing, or regret post-close. For operations and admin teams, it can also mean rework, extended conversations, or missed opportunities to align borrowers with the most appropriate MI structure from the start.
Given rising home values, varied borrower time horizons, and risk-based pricing models, failing to address monthly MI strategically leaves value on the table for both lenders and borrowers.
What is monthly mortgage insurance?
Monthly mortgage insurance is a premium added to the borrower’s monthly mortgage payment. The premium is calculated using factors such as loan amount, loan-to-value (LTV), credit score, debt-to-income ratio, and property type. Because it aligns with standard monthly payments, it’s familiar, easy to explain, and simple to administer.
From an industry-wide perspective, monthly MI remains the most commonly used structure, making it a natural starting point in borrower conversations.
Why monthly mortgage insurance continues to lead
With multiple ways to structure MI, you might be wondering: why do so many borrowers choose the monthly option? Here are a few important reasons to highlight.
Key Advantage #1: Lower Upfront Costs
Monthly MI helps borrowers preserve cash at closing. Unlike single-premium or split-premium options, it avoids a large upfront payment. For borrowers focused on reserves, home improvements, or maintaining flexibility, minimizing cash to close is often a deciding factor.
This structure allows lenders to position MI as a cash-management tool, not just a requirement.
Key Advantage #2: Built-In Flexibility for Shorter Time Horizons
Monthly MI can typically be canceled once the loan reaches 80% of the home’s original value. In some cases, cancellation may occur sooner if the property appreciates and a new appraisal is obtained—subject to servicer guidelines.
For borrowers who expect to refinance, move, or accelerate paydown within five years, monthly MI avoids the risk of paying a large, non-refundable upfront premium they may never fully benefit from.
Key Advantage #3: Risk-Based Pricing Rewards Strong Credit
MI pricing today is largely risk-based. Borrowers with higher credit scores, often 760 and above, may see very low monthly MI costs. In these scenarios, monthly MI can be an efficient, cost-effective solution that delivers simplicity without sacrificing affordability.
For loan officers, this provides a clear talking point when working with well-qualified borrowers.
Key Advantage #4: Potential for Faster MI Cancellation Through Appreciation
In appreciating markets, borrowers may be able to cancel monthly MI sooner than expected using a “current value” appraisal, rather than waiting solely on amortization (paying down the loan). While servicer approval is required, this option gives borrowers added flexibility.
Because monthly MI does not involve a large upfront premium, borrowers benefit from early cancellation without having prepaid for coverage they no longer need.
Bottom line: monthly MI is more than a default option
Monthly mortgage insurance isn’t just an added cost. It can be a strategic tool. For buyers who value flexibility, lower upfront expenses, and the ability to adjust their plans over time, it often provides the best balance.
For lenders and operations teams, understanding how and when monthly MI fits best empowers clearer guidance, smoother workflows, and more confident borrowers. By positioning monthly MI as a thoughtful choice rather than an assumed cost, we all can drive better conversations, and better outcomes, across the loan lifecycle.
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. Monthly MI may be the most popular option, but when making a 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 an Account Manager 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.
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