Success Story: A Smaller Down Payment Saved My Client $3,720 Every Year

Close Up Of Parents Cuddling Newborn Baby Boy At HomeAfter asking Jim & Suzanne a number of questions regarding the family finances, they came to the conclusion that providing a 10% down payment would be better financial move because it would allow them to eliminate their outstanding credit card and auto loan payments as well as establish an emergency reserve.

The emergency reserve was a prudent decision because the new monthly mortgage payment was almost 2 ½ times larger than their former condo payment and it would allow them to handle many, if not all, of life’s little unbudgeted emergencies without having to use credit.

Had they decided to provide a 20% down payment, the extra 10% down would have saved them $215 per month, but eliminating the credit card and auto loan payments saved them $525 per month, even with the higher mortgage amount and the monthly mortgage payment that comes with only a 10% down payment.

Providing a 10% down payment requires a buyer to purchase mortgage insurance to protect the lender in the event of foreclosure and is usually part of the monthly mortgage payment. However, we utilized a form of mortgage insurance called up front, or single premium, mortgage insurance, which allowed the client to pay a one-time premium at closing and avoid the cost of monthly mortgage insurance. This one move saved the client $1,500 per year in mortgage insurance payments and provided a greater tax deduction.

Jim & Suzanne save $3,720 every year ($525 – $215 = $310 x 12 months) by decreasing their down payment and eliminating their outstanding debt.