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  • Writer's picturekellyzrealtor

How Much Does Your Down Payment Impact Your Mortgage Payment?

At some point during the homebuying process, most buyers will feel stressed about their down payment. They wonder if it’s enough or if it’s too much, or how it will impact their interest rates, mortgage payment, and interest owed. Let’s go through some of the math so you can see how different down payment amounts stack up.


For this example, we’ll be looking at a home that costs $300,000 and has a 4% interest rate for the mortgage. If you put 20% down on the home, which comes out to a $60,000 down payment, you’ll pay $1,145.80 per month on your mortgage.


But let’s say that you did a great job saving and want to put an extra $20,000 down when buying the home. With an $80,000 down payment (or 26%), your monthly payment will be $1,050.31. When it comes to your monthly payments, you’re looking at about a $95 difference for the same $300,000 home with a 4% interest rate.


In terms of your monthly budget, that’s really not a big change. The amount will add up over time though, and the more you put towards your mortgage’s principal (the $300,000), the less you’ll pay in interest over time. However, you may decide that you could put that $20,000 to better use in an emergency fund or as a down payment for an investment property.


When it comes to deciding how much to put down, you’ll need to look at your priorities. Is having the lowest monthly payment and lowest amount paid to interest the most important thing? Then you should consider putting a higher percentage down.


But if you’re looking to have more liquidity with your funds or want to put those savings towards a different financial goal, you can look at putting a smaller percentage down for your down payment.


Your lender will be able to help you project out different down payment scenarios like this one so you can make the best decision for your lifestyle and your financial situation. I know some great lenders in our area that are highly knowledgeable and trustworthy.


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