When is it cheaper to pay for mortgage insurance, than save a larger deposit?
Mortgage insurance adds up as it is a recurring payment, but it is a good option for homebuyers who do not have a 20% deposit. Since the late 1980s, the Australian government has been opening its doors and countless opportunities for interested home buyers with low credit scores or a lack of deposit savings. MI is profoundly beneficial & a great tool, when home prices are increasing faster than one’s ability to save.
A perfect example of when mortgage insurance is cheaper than a larger deposit is on a home worth $600,000. A 20% deposit is $120,000, which is a lot of money to save in bulk. Typically, mortgage insurance costs up to $3,000 per year. If the contract is good for thirty years, that means the borrower pays $90,000 over thirty years, which is at least $30,000 less than the 20% deposit.
Not everyone likes paying mortgage insurance monthly, though, and would prefer to spend hundreds and thousands of dollars at once on a home. Want to find out an estimate on how much you can borrow for a mortgage based on competitive interest rates? Use our online calculator. If you have more specific questions, you can also reach out to a Mortgage House expert.
Mortgage Insurance Vs. Larger Deposit Conclusion
Mortgage insurance is a great option for homebuyers that cannot save at least 20% on a home. Contact our team today to see if you qualify for a low deposit loan!