How Much Is The Right Amount To Commit To Your Down Payment Lets Take A Look

Dated: 09/27/2017

Views: 11

How Much Is the Right Amount to Commit to Your Down Payment? Let's Take a LookAre you thinking about buying a new home? If you are going to take out mortgage financing, one consideration you will have is your down payment, which is the amount you pay up front in cash to cover some of the purchase cost. Let's consider a few points that will help you to decide how much is the right amount for your down payment.

How Much Do You Have?

The most obvious question you will need to answer is: how much do I realistically have to place as a down payment? Keep in mind that your down payment is money that you aren't going to see again until you sell your home. While you want to invest a significant amount for reasons we will share below, you still need to maintain a cash cushion of a year's salary or so in case you fall ill or lose your job.

More Down, Less Monthly

The main case for putting as much as you can into your down payment is that the more you invest, the less you have to borrow. This means that over time, you will pay less interest and you will also have lower monthly payments. Keep in mind that with today's low interest rates it's a bit less of a burden to carry a large mortgage. However, these rates may swing upwards over the years, which will increase your costs.

The Need For Private Mortgage Insurance

If you're going to put less than 20 percent down on your home, you're almost certainly going to be required to purchase mortgage insurance. There are numerous options available to you, including those offered by the Federal Housing Administration or FHA. Your mortgage lender will share this and other private insurance policies that will protect you.

Don't Forget About Lost Opportunity Cost

Finally, don't forget to factor in the lost opportunity cost that comes with investing a large down payment. Unless you have a terrible money manager, your mortgage interest rate is likely to be less than you would be able to make investing the difference in your financial portfolio. If you're thinking about putting an extra $50,000 in your down payment, consider that you might be able to make 5 to 10 percent on that over the next decade. There are no guarantees in investing, so speak with a professional for further guidance.

It's not easy to choose the perfect amount for your down payment. If you have further questions or would like to know more about your mortgage options, contact us today. We're happy to share our experience to help you choose the best mortgage for your new home.

Contact Dennis Hearing

Sr Loan Originator

Supreme Lending

Cell (954) 648-4949

NMLS #892525

[email protected]

Supreme Lending

Blog author image

Carlleen Wilson

Carlleen offers the ultimate in enthusiastic, personalized, professional service. Born in the Mid-West and raised in Palm Beach County Florida with 20 years’ experience in South Florida & Treasure C....

Latest Blog Posts

6 TIPS BEFORE SELLING YOUR HOME

Meet with your trusted real estate agent: Your agent can save you a lot of time and energy by guiding you through the pre-listing phase. They are there to serve you and help you decide if

Read More

757 viewsSep 24, 2018, 03:48pm Buying Home Insurance 101: What You Need To Know About Your Coverage Options

If you're looking into buying a home, you're probably aware that you're also going to need to buy homeowner's insurance. Navigating policies along can be confusing and overwhelming, which is why we

Read More

How Do I Unclog Household Drains?

So there you are, minding your own business while having a shave over the bathroom sink, when you see it. The water. It’s not draining. And your sink is threatening to overflow. You turn off

Read More

Seasons Change

Hey there and welcome to my real estate blog! I'd like to start off by saying thanks so much for taking some time to stop by and check me out here.Anyone who knows me very well knows that I spent a

Read More