As a general rule, borrowers have to obtain private mortgage insurance if their down payment is less than 20% of the value of the home. But what many people don’t realize is that there are a number of different options for the way this insurance, called PMI, is handled. Some of these could reduce your monthly payment or save you money in the long term.

PMI is a bigger issue than it used to be. For one thing, lenders are very strict about requiring it these days. Five years ago, at the height of the boom, some lenders didn’t always require PMI in every case where it was applicable, but that’s no longer true.

For another thing, real estate values have declined in many areas and appraisers have become more conservative. That means that some people who want to refinance are now subject to the PMI rules where they wouldn’t have been even a few years ago.

In general, there are three ways that you can arrange PMI:

• You pay a fixed insurance premium each month until your equity equals about 20% of the property’s value.
• You pay for the insurance upfront all at once, but you add this cost to the amount of your mortgage.
• You pay for the insurance upfront and add the cost to the amount of your mortgage – but you get a partial rebate if you sell the property or otherwise terminate the loan within five years.

The first option is by far the most common, but that’s because most people don’t realize that the other options exist.

The first option will result in the largest increase in your monthly payments. For instance, on a $90,000 loan for 30 years at 5 percent, you’ll pay about $46.50 a month for PMI. By contrast, the second option would result in a monthly payment increase of only $6.77 – and even the third option would add only $10.63 a month.

However, that doesn’t necessarily mean that the first option is a bad deal. With the other options, you’re taking out a larger mortgage, which means you’ll pay for a longer time and your interest cost will be higher over the life of the loan. You’ll need to do the math to see which choice is really the best for you.

In general, though, the first option is better if you expect the property to significantly appreciate in value in the short term, so you can hit the magic 20-percent equity point quickly and stop making payments. The first option might also be good if you can deduct the monthly payments on your taxes.

The second option makes more sense if you have a long-term mortgage, if you can earn a high investment rate on the money you’re saving each month on PMI, or if the difference in monthly payments is critical to your being able to afford the home.

Finally, the third option makes sense if you plan to sell quickly and take advantage of the rebate.