Is It Worth It to Put More Than 20 Percent Down? - The Law Office of David R. Rocheford, Jr., P.C. (2024)
Are you thinking of buying a new home this spring or summer? If so, you’re not alone. Many thousands of individuals and families alike will become homeowners this year. Whether you’re a first-time buyer or a seasoned veteran of the housing market, you probably know there are significant choices to make. One of the big decisions you will have to ponder is how much you want to invest in your down payment.
With that in mind, let’s try to answer the question of whether or not it is worth it to put more than 20 percent of the home’s price in your down payment.
Before you can decide how much to put down, you first need to determine how liquid your finances are. That is, how much cash do you have access to? For example, if you are considering a $300,000 home, a 20 percent down payment is $60,000. If you have more than $60,000, fantastic. However, if you have less than that, you might have to do a bit of work to save up the remainder.
Even if you do have enough available cash now, you won’t have access to it once you take possession of the home. It is important to leave yourself with some cash in case of emergencies or for other uses.
If you do choose to invest more than 20 percent in your down payment, it’s possible that you will gain access to a lower interest rate for your mortgage. Many lenders look favorably on homebuyers that are investing more of their own money and borrowing less. Be sure to check with your mortgage advisor to find out if you qualify for lower rates.
Lower Monthly Payments Await
Finally, choosing a down payment higher than 20 percent means that you will have lower monthly mortgage payments in the future. You are borrowing less so you will owe less. This can provide a nice boost to your monthly budget moving forward as you will have more free cash flow each month.
Try to keep in mind that there is no perfect answer to the question of how big your down payment should be. Choosing the best course of action means taking a good, long look at your current financial situation and deciding what your goals are. When you’re ready to discuss buying a new home contact us. Our professional mortgage team is happy to share our experience!
Finally, choosing a down payment higher than 20 percent means that you will have lower monthly mortgage payments in the future. You are borrowing less so you will owe less. This can provide a nice boost to your monthly budget moving forward as you will have more free cash flow each month.
First-time home buyers have long considered a down payment of 20% on a mortgage the standard amount. But this initial payment can sometimes be set as low as 5% for a conventional loan—and buyers always have the option of paying more than 20% of the purchase price.
Also, keep in mind that you'll need to have enough cash for closing costs and other savings needs. Won't provide as much benefit when rates are low: If mortgage rates are low, you could potentially put that money to better use by investing it or paying down high-interest debt.
Your higher down payment can reward you with additional benefits as well: Lower monthly payments. Less interest paid over the life of the home loan. More equity in your house, which helps protect your investment.
It's an ok down payment. A GOOD down payment would be 20% of the purchase price of the home in this case at $350,000 that would be $70,000. If you put a 20% down payment on a home then you do not have to pay for a private mortgage insurance (PMI) EVERY SINGLE MONTH.
How much down payment do you need for an investment property loan? As a rule of thumb, buy-and-hold real estate investors normally make a down payment of around 20-25% when financing an investment property, although some loan programs offer investment property financing with down payments as low as 15%.
At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
There are, in fact, many benefits to making a larger-than usual down payment, as we'll discuss below, including: avoiding having to pay for private mortgage insurance. reducing the amount of your monthly mortgage obligation. reducing the total amount of interest you'll owe.
Not only might making a 30% down payment on your home give you more flexibility month to month, but it could save you money on mortgage interest all in. In the above example, a 30% down payment instead of 20% saves you about $54,000 on interest throughout the life of your loan.
Introduction: My name is Saturnina Altenwerth DVM, I am a witty, perfect, combative, beautiful, determined, fancy, determined person who loves writing and wants to share my knowledge and understanding with you.
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Are you thinking of buying a new home this spring or summer? If so, you’re not alone. Many thousands of individuals and families alike will become homeowners this year. Whether you’re a first-time buyer or a seasoned veteran of the housing market, you probably know there are significant choices to make. One of the big decisions you will have to ponder is how much you want to invest in your down payment.