Recently one of our investors informed us that they have a new single premium mortgage insurance plan for loans with 10% down. This plan is for single family residences no condo properties and is a very reasonable alternative to standard mortgage insurance which involves a monthly payment for a very long time. Basically the cost of this mortgage insurance is a one time payment of 1.35% of the loan amount. This eliminates any and all monthly mortgage premium payments for the life of the loan. It can save a significant amount of money if you have the home for more than 2 years.
For example, under the old monthly payment system if you purchased a home for $200,000 with standard mortgage insurance payments the mortgage insurance portion of the payment would be $93 per month for 120 months. If, you used the single pay plan the upfront cost would be $2430. So if you plan to have this home for longer than 26 months the single pay would be much less costly. Over say 5 years you would save $3348 and over 10 years you would have saved nearly $9000.
Another benefit of this plan is you can qualify for more house on the same income. How much more? You can qualify for nearly $20,000 more home on the single premium plan than with the monthly premium plan.
Where to get this extra 1.35% at closing? It can come out of the seller concessions, the mortgage broker can price it into the rate or you can have a gift from parents for this portion of the cost.
So if you are looking at buying a home soon, and if you have 10% down, this is a great plan for you.
Just a note to remember. When you have a 10% down payment, about 1/2 of that can be a gift from a family member. The lenders require you have at least the first 5% down as your own (borrower) funds. The rest of the down payment can be a gift as can all or part of the closing costs.
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