I have been doing this job for a long time and the one thing I have realized is that nobody likes to pay mortgage insurance. In fact, a lot of people actually prolong the home purchase so they can accumulate the 20% down payment to avoid paying it.
But, what exactly is mortgage insurance? It is an insurance policy that protects lenders against early default.
History has shown that people who put down less than 20% for their down payment have a higher risk of defaulting on the loan. In order for lenders to actually write these loans and take an additional risk, they purchase insurance that is then passed through to the borrower. This insurance is doing nothing but protecting the lender.
You don’t have to keep mortgage insurance forever. Once you reach a point where you have a significant portion of equity, normally 22%, your home mortgage insurance does drop.
In the last year or so, with so many home prices stabilizing and in some areas home prices going up, mortgage rates at the private level have started decreasing. In fact, just last month, rates were slashed again.
The rates for extremely high credit score individuals have been super low. I just priced out a $400,000 loan and the mortgage insurance was less than $80 per month. In that case, it made a lot more sense for that client to not put down 20% and instead hold the money to reinvest into the property.
I believe a lot of people have a fear of mortgage insurance. However, it is really not that bad anymore.
If you are waiting for a 20% down payment before purchasing, please reach out to me. I would be happy to price out exactly what mortgage insurance would cost for you per month.