Welcome to the Logix SmartLab

How Much Money Should I Put Down on my Mortgage?

Posted by Admin on 9/26/2015

Alright, so you’re thinking of buying a house and wondering how much your down payment should be?

For many folks, putting down 20% is really a stretch, but putting down less than 20% can cost you quite a bit in a short amount of time.

Let’s say was have two houses, both worth $200,000.

The first one puts down 20%.  They borrow the rest at 5% interest for 30 years.  Principal and interest will be $859 a month.

Now, about that other house. They just put down 10%. Their monthly principal and interest is $966 a month. So already, they’re spending $107 more a month.  But they’ll be spending more, and here’s why.

The less you put down, the higher the interest rate you pay

So instead of 5% in our example, the low downpayment house is paying 5 and a half percent.

Now their monthly payment has jumped again, to $1,022 for principal and interest.  $163 more per month than their neighbor.

But there’s more.

If you don’t have 20% equity, that’s the slice of the home’s value you yourself have paid for, if that slice is less than 20% the lenders require what’s called Private Mortgage Insurance or PMI as protection in case you decide to walk away from the loan.  PMI usually runs between $50 and $100 a month.  In our case here, the people with the smaller down payemtn are now paying $244 more a month than the 20% family.

That means they saved $20,000 on their down payment, but they’ll pay that much extra in about 7 years, with 23 more to go on the mortgage.

20% down may not be possible for everyone, but just go into with your eyes open.

If you're interested in speaking with Logix about a mortgage, call us at 800-328-5328, or visit https://www.logixbanking.com/loans/mortgages

Do us a favor. Subscribe to our posts, and tell your friends about us so they can be smarted about their money too.

Topics: Home Loans, Saving

Meet the blogger

Hi there! Come on in.

Feel free to peruse about. Here you’ll find stories, posts and tools aimed to assist you as you’re faced with daily to once-in-a-lifetime financial quandaries. This is your SmartLab (lab coat optional). We want you to get the most from our articles, and we welcome your ideas to help us continue to bring valuable content to you. Check out the comment section at the bottom of every post for easy ways to share feedback. We’re learning, too, and what better way to encourage smarter banking than to share tips and resources with each other? Not to mention, it’s a great chance for us to get to know each other!

Subscribe to Email Updates

Recent Posts