June 2, 20263 min read
The simple version is easy; the mortgage-specific details are where the answer becomes valuable. Mortgage default insurance protects the lender against borrower default, which can reduce the lender's credit risk and funding cost. That is one reason insured mortgages can sometimes be priced below comparable uninsured loans.
How the mortgage math works
Here is what matters most:
- The borrower pays an insurance premium when the mortgage requires default insurance.
- The lower interest rate therefore should not be considered in isolation from the premium and down payment.
- Insurer qualification rules still apply, including limits around purchase price, debt-service ratios, credit and property eligibility.
- An insured mortgage can be a strong fit for an eligible buyer with less than 20% down, but it is not automatically cheaper in every scenario.
Compare the total cost of insured and conventional structures if you have flexibility around your down payment.
Want this applied to your own numbers?
Call Phil Cragg at 866-349-4915 or request a written comparison.
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