South Orange County Blog from Bob Phillips

Financing Alternatives With 10% Down

Some suggestions from one of my preferred lenders.

Mortgage Insurance VS No Mortgage Insurance 

A borrower wants to purchase a property with 10% down payment and wants to know if they have to pay mortgage insurance. When the loan-to-value is greater than 80% on the first loan, the answer is yes.

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Below you will find 3 examples. 1) an example of financing with mortgage insurance 2) an example utilizing a second loan of 10% to achieve 80% financing, known as an eighty-ten-ten and 3) an example showing how to user a higher interest rate to pay a one-time upfront mortgage insurance premium eliminating the monthly premium. 

1)      10% Down Payment (90-10) With Mortgage Insurance 

In this example the borrower has mortgage insurance which stays on until the loan reaches 80% loan to value. Mortgage insurance is not tax deductible. 

$400,000 Sales Price

$  40,000 Down Payment (10%)

$360,000 Loan Amount (90%) 

$1,842 Principal and Interest Payment at 4.5%, 30 Year Amortization

$   132 Mortgage Insurance

$1,974 Combined Payment

 

2)      10% Down Payment with 2nd (80-10-10) With No Mortgage Insurance 

In this example the borrower finances with a 2nd loan thereby making the 1st loan 80% loan to value eliminating the need for mortgage insurance. 

$400,000 Sales Price

$  40,000 Down Payment (10%)

$  40,000 Second Loan Amount (10%)

$320,000 First Loan Amount (80%) 

$1,640 Principal and Interest payment at 4.5%, 30 Year Amortization

$   175 Interest Only Payment at 5.24%, Home Equity Line of Credit

$1,815 Combined Payment

 

3)      10% Down Payment (90-10) With No Mortgage Insurance 

In this example the borrower accepts a slightly higher interest rate creating a lender credit to pay an upfront mortgage insurance premium eliminating the monthly mortgage insurance. In addition, the interest on the loan is tax deductible. 

$400,000 Sales Price

$  40,000 Down Payment

$360,000 Loan Amount 

$1,905 Principal and Interest Payment at 4.875%, 30 Year Amortization 

While rates and terms are subject to change these examples are meant to show borrowers the options available to them so they make an educated decision of their home financing.

Want to discuss your options, or talk to my lender friend?  Give me a call or text ( 949-887-5305 )  or shoot me an email:  BobPhillipsRE@gmail.com

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