It’s time for a little Monday Morning Mortgage Math! Let’s get educated on the down payment options available to get you into the home of your dreams.
The amount you put down on the initial purchase of your home can affect both your immediate and long-term budgeting. Planning ahead and deciding which down payment option works best for your financial situation is a key factor to a successful mortgage plan.
In the majority of cases, the minimum required down payment is 5% of the property price. This means that if the total purchase price of a home was $300,000, the minimum you could put down would be $15,000. It’s also important to consider that on top of your down payment, there are also closing costs that will be incurred when the property is transferred to your name.
Putting 5% down may be a good option for you if you don’t have the funds available for a larger down payment – however, keep in mind that any down payment less than 20% will require an additional Mortgage Default Insurance premium. This premium can be paid up front, although most people choose to add this amount to the total cost of their mortgage; that way, the payment is taken out at the same time as your bi-weekly or monthly mortgage payment and is one less cost to worry about upon closing.
So now that you know what Mortgage Default Insurance is, you may be wondering how much it costs.
The amount of the mortgage default insurance premium is proportionate to the percent of your down payment, as well as the total purchase price of the home. For example, a 15% down payment on a home will require less insurance than if you were to put 10% down on the same home. To see how different down payment sizes affect your mortgage payments, use our online calculator. If you’d like to speak with a certified broker regarding your down payment options, contact the IMS team for a complimentary mortgage consultation today!