What is Financed MI?
Financed mortgage insurance (MI) allows the borrower to pay the lump sum of the MI premium up front, as opposed to having a monthly MI premium. It also allows the borrower to roll the premium into the loan amount in order to lower the amount of cash needed at closing.
MGIC's Refundable Single Program is Financed MI that offers borrowers the opportunity to receive a refund if the MI is cancelled within the first five years. While MI cannot be canceled in the first two years, most homeowners do cancel within 2 - 4 years. The amount of your refund will be based on how early you cancel your MI.
Compared to a piggyback loan, Financed MI almost always results in lower monthly payments, provides maximum tax-deductibility, and helps avoid closing two loans and having two mortgages on one house.
The following example compares Financed MI to a piggyback loan on a $300,000 home with a 10% down payment using a 30-year-fixed rate.
| Piggyback | Financed MI | |
|---|---|---|
| 1st Mortgage Amount | $240,000 | $270,000 |
| 1st Mortgage Interest Rate | 6.75% | 6.75% |
| Financed MI Premium | — | $5,670 |
| 2nd Mortgage Amount | $30,000 | — |
| 2nd Mortgage Interest Rate | 9.25% | — |
| Total Amount Borrowed | $270,000 | $275,670 |
| Monthly Payment on 1st Loan | $1557 | $1788 |
| Monthly Payment on 2nd Loan | $247 | — |
| Total Monthly Payment | $1804 | $1788 |
| Using a 6% home appreciation rate, MI would be eligible for cancellation in 3.4 years, at which time the borrower would receive a $1,814 refund! | ||
*These numbers are used for example purposes only. Actual loan amounts will vary based on the borrower's credit score and financing approval.
For help finding a lender near you, or for more information about comparing piggybacks to MI options with your loan examples, send an e-mail to Single.File@mgic.com