Saving Money Can be Music to Your Ears

Author's note: the information contained in this post is directed at buyers of homes for their primary residences.  The reason I'm posting it here is to give you, the REI community, more information about mortgages that you can pass along to potential buyers of your fix-and-flip properties. Knowledge is power, right?

For all the “old” people out there, you’ll instantly know the name Daryl Hall. For those of you who are still on your original set of adult teeth (perhaps because you got your braces off fairly recently), Daryl Hall is a musician (the blonde half of the duo Hall & Oates – the one who DIDN’T have a mustache that looked like it was straight out of an ’80s adult film) with a number of albums (albums are these big, black 12-inch vinyl “platters” that look like a pregnant CD) that have been certified as gold/platinum and hit songs to his credit, some of which he recorded himself and some he wrote for others.

Going back to 2007, he started a show on the internet called Live from Daryl’s House; in 2011, he took it to cable where it currently airs. The concept is relatively simple: he has musicians from all genres and eras come to his house to jam with him and his band. In between songs, they talk about music and memories, and they usually end up eating something – not a bad gig if you can get it. Because he pulls artists from so many different musical stylings, you get some very interesting combinations that you would never expect to hear – and they sound really good. In many instances, you might find yourself saying, “They should record that for real and release it as a single.”

In the mortgage world, we have one of those rare “crossover” singles that could bring a lot of people to the dance floor: it’s called “Financed Mortgage Insurance” (granted, that’s not the sexiest name for something to appear on iTunes, but I could think of a lot worse names like “Every Time I Eat Vegetables It Makes Me Think Of You” by The Ramones, among others). When folks don’t have 20% to put down on a house, and they don’t qualify for certain programs, they’re required to add mortgage insurance. On a $200,000 loan, for example, that monthly premium can add over $100 to the total monthly payment. For most people who couldn’t come up with the initial 20% down payment, an extra $100 each month is sort of a big deal.

Paying the premium for the insurance up front in one lump sum is an option, but it was hard enough for the buyers to come up with the small down payment needed, much less a down payment of 20% of the loan amount – so it’s not really an option. However, in many cases, that one-time insurance premium can be financed as part of the mortgage. On the same $200,000 loan, the single premium could be just over $4,500. By combining the two, the buyer might be able to get a loan for $204,500 (30-yr @ 4.00%) resulting in a payment of just $20.00 more/month.

That’s over $80.00 less than the overall payment for someone paying a monthly premium. In just five years, that’s a savings of around $5,000! That’s a good option with a beat you can dance to.

Granted, this may not be as big a hit as when Run-D.M.C. crossed over from the rap world to give a new twist to Aerosmith’s huge hit, “Walk This Way” (Google it, kids), but it sure beats Mariah Carey trying to have a duet with herself in Times Square on New Year’s Eve. You can’t unhear or unsee that, but saving $80.00+/month could help!