When is the Mortgage Default Insurance premium typically paid?

The Mortgage Default Insurance premium is typically paid at the time of closing. This is crucial because the insurance protects lenders in the event of a default when the borrower has a high loan-to-value ratio. By paying the premium up front, it allows the borrower to secure financing with a lower down payment, making homeownership more accessible.

Paying the premium at closing means that it can be included in the overall costs associated with the mortgage. Some borrowers may choose to finance the premium into their mortgage, spreading the cost over the life of the loan. However, the initial payment is required at the closing to activate the coverage for the lender.

Consider the context of the other options: paying at the loan application would not align with standard practice, as the need for insurance is contingent on the loan being finalized. Monthly payments or annual prepayments are more typical for ongoing fees or taxes rather than an upfront premium like Mortgage Default Insurance. Thus, paying at the time of closing ensures the necessary protection is in place from the start of the mortgage agreement.