If you are like most home buyers who begin their Warsaw, Indiana home search, you start by deciding “How much house” you can afford on a monthly payment basis. Once you have arrived at that figure, you can then calculate how much the overall price needs to be in order to stay within budget.
Unless you are putting down 20% or more of the purchase price there are normally 4 costs within your monthly mortgage payment. Those 4 costs are:
- The principle & interest portion of your loan payment
- Your homeowners insurance
- Your property taxes
- Your monthly mortgage insurance premium
Most people have heard of the “dreaded” mortgage insurance (MI), commonly referred to as PMI or private mortgage insurance. But were you aware that you can pay an upfront single premium mortgage insurance and be done with MI for the life of your loan?
The upfront mortgage insurance premium can be paid upfront by you, by the lender or even negotiated into your purchase as a seller paid concession. In certain instances, the premium can even be financed into the loan.
I know what you’re thinking: “It must be more expensive, right?” Not at all! As a general rule the cost of single premium mortgage insurance is equal to only 30 months of the monthly premium would be.
Example: A $150,000 loan on a purchase with 5% down would normally have a monthly mortgage insurance premium of $74 for approximately 12 years. Brace yourself! That would amount to over $10,000 in mortgage insurance premiums over those 12 years. Alternatively, an upfront single premium would be only $2,175, a savings of over $7,500!
Without this cost added to your monthly payment, you could get a lot “more house” or a shorter term on your loan.