How is the annual mortgage insurance premium (MIP) paid?

The annual mortgage insurance premium (MIP) is typically paid monthly as part of the overall mortgage payment. This approach is beneficial for borrowers because it allows them to spread the cost of the insurance over the term of the loan, integrating it into the regular monthly payment. This means that rather than needing to come up with a large sum at once or being exposed to significant financial burdens at specific intervals, the cost is effectively managed within the usual payment schedule for the mortgage.

Lump-sum payments at the end of the loan term would impose a heavy financial burden at that point, making it less manageable for homeowners. Similarly, quarterly or annual payment options would require borrowers to come up with larger amounts of money at those intervals, which may not align well with their budgeting practices. Thus, the monthly integration of MIP is designed for convenience and financial predictability for those with a mortgage.