Condo Financing - Borrower Paid PMI vs Lender Paid PMI

[Minka Sha]

Buying a condo in SoCal, and got these options from the lender. We negotiated a 12K seller's credit as well that I'll be using to buy down the points. What are you guys thinking on these? Have you used lender paid MI before? If so, when? 

I feel that the MI can be cancelled in future with Option 2 (e.g., appreciation appraisal); however, the security of not having to worry about things in Option 1 is desirable too.

Option 1 - Lender paid mortgage insurance: 459K, 5% down, Rate is 4.375%, no monthly PMI Note: Using 12K seller's credit to buy down the points.

Option 2 - Lender paid mortgage insurance: 459K, 5% down, Rate is 4.125%, PMI of $55 per month. Note: Using 12K seller's credit to buy down the points.

More math for those interested:

Loan Options	Lender paid	Buyer paid
Purchase Price	$452,000.00	$459,000.00
% down	5%	5%
Loan Amount	$429,400.00	$436,050.00
APR	4.40%	4.20%
Duration of loan	360	360
Total PMI Paid	$0.00	$6,082.90
PMI	0.00%	0.16%
Total PMI	$0.00	$675.88
Monthly PMI	$0.00	$56.32
Monthly P+I	$2,150.27	$2,132.36
HOA	$404.00	$404.00
Taxes	$291.67	$291.67
Insurance	$150.00	$150.00
Out the door monthly	$2,995.93	$3,034.35