Higher down payment or mortgage insurance

Question: How do I know if it is cheaper to pay for private mortgage insurance or to put up a larger downpayment on a house?

If you already have the money for a down payment of 20% or more, you will avoid paying mortgage insurance (MI). From a simple payment standpoint, you will save money by making the larger down payment. Your payment will be lower because of the smaller loan amount AND not having to pay MI.

I cannot tell you what the difference in mortgage payment will be because I do not know the loan amount you are contemplating.

There are a couple of reasons why you might want to make a smaller down payment, even when you have the cash available. The first is that you may have some other use for the money. Another biggie is using it to pay off high-interest credit cards (revolving debt). In most cases paying down credit cards more than pays for the added MI and is an excellent way to make your new home more affordable!

You should also be aware that MI goes away after a while. It will drop off automatically once the loan is 78% of the home's original value, but with appreciation you could get it removed sooner, depending on the home's value.

Either way, enjoy the buying process Buying a home should be a fun experience!

Call or text me for quick no hassle answers.

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