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Is a Larger Down Payment Worth It in Today's Mortgage Rate Environment? What Experts Say
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TL;DR
- A larger down payment reduces the amount borrowed, lowering monthly mortgage payments and total interest paid.
- It can help qualify for a lower interest rate, especially with down payments of 25-40%.
- It may reduce or eliminate private mortgage insurance (PMI) costs on conventional loans.
- A larger down payment can lead to appraisal waivers, saving over $500.
- It increases equity and can make a homebuyer more competitive.
- A major drawback is depleting cash reserves, potentially leaving less for emergencies or unexpected repairs.
- It might conflict with other financial goals like retirement savings or paying off debt.
- Homebuyers should ensure they have a sufficient emergency fund (e.g., six months of expenses) after making a large down payment.
- Other strategies to lower payments include buying a less expensive home, shopping lenders, improving credit scores, or buying points.