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Most folks initially believe mortgage insurance is a means to an end, waste of money, boring or all of the above.   Depending on a borrower’s financial goals, it should not be automatically dismissed.  Mortgage insurance can be a useful way to leverage money. 

Say a buyer wishes to purchase a home at $250,000 and they have $60,000 in savings.  They could opt for a 20% down payment – resulting in a principal & interest payment of $1,043.29 – and have $10,000 available after purchase.  Or they could opt for a 10% down payment and have a principal, interest & mortgage insurance payment ranging from $1278.71 to $1,187.79 and have $35,000 in liquid funds.

Furthermore, there are several options to consider.  Compare the differing principal, interest & MI payments resulting from three popular strategies:
-  Monthly: $1,278.71
-  Lender Paid MI (paid via a higher rate): $1,207.85
-  Financed (into the loan amount): $1,187.79

You can see the loan balances after five years vary by $2,471 but the amount saved in payments can be as much as $5,455.  Plus there are $35,000 available as liquid funds.  And don’t forget the potential tax benefits of mortgage insurance deduction.

If your client considers purchasing a home with the assistance of mortgage insurance and they have questions about how to structure the loan, it would be my pleasure to help them maximize their purchase and minimize their payment.

 
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Rebecca Madej is a Charlotte mortgage banker who excels at helping clients choose the appropriate mortgage strategy and enjoys demystifying the financial process on her blog at rebeccamadej.com.   She publishes a weekly “Mortgage Matters” e-newsletter and can be reached at rebeccam@cunninghammortgage.com or 704.488.8883.
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