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Lel
Posts: 5,268
Registered: ‎03-18-2008
Re: Pay FHA ufmip at closing or finance it?

JusdoNit wrote:

No one has an idea of how much the potential savings may be of paying the ufmip (fha upfront mortgage insurance premium) out of pocket? vs having it financed into your loan.


There's no right answer to this.  The question you should be asking yourself is this: what is the opportunity cost of paying the UFMIP out of pocket versus rolling it into your loan?

 

Let's say your UFMIP is $5000.  If you roll it into your loan, then you're going to be paying interest on that money.  However, you might be a savvy stock market investor and feel certain that you invest the $5000 that you didn't put down to pay the UFMIP and get a better return than the interest that you have to pay.

 

So if you roll the UFMIP into your loan, pay 4% interest on it, but then take the $5000 and get a 6% return on your investment, then you've done well.  However, if the stock market tanks and your returns don't match the interest that you paid, then you would effectively lose money on the deal.