benefits of putting 20 down on a house


Making a 20 percent down payment typically allows you to get better loan terms from your mortgage lender.

Benefits of going big: A big down payment can help you in several ways. Lower rates: You might qualify for a lower interest rate if you put more down. Lenders like to see larger down payments because they can more easily get their money back if you default on the loan .

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A 20% down payment also lowers your loan-to-value (LTV) ratio, which is the percentage of the home’s value that is financed by the mortgage. Putting 20% down means you would be financing 80% of the home’s purchase price – giving you an 80% LTV ratio.

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If you are able to make a 20 percent down payment on your home, your lender believes you are less likely to walk away from your mortgage and go into foreclosure. If you have the money for a large down payment, you will most likely be able to continue to have enough income to pay off your loan and negotiate a lower interest rate.

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By putting down 20 percent of a home’s purchase price, you’ll avoid paying private mortgage insurance (PMI), and your monthly mortgage payments will be lower.

Rob Carrick and Lesley-Anne Scorgie explain the dangers of putting down less than a 20 per cent down payment on a house.

If you’re the homebuyer, and you decide to put 30 percent down on a $250,000 house, instead of 20 percent, then you’re spending $25,000 more ($75,000 down versus $50,000 down) at the time of purchase. Imagine if you put that $25,000 in the stock market today.

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The advantages look like this: First, if you purchase with 20 percent down your monthly payment will be smaller because you will owe less to the lender. Second, by putting at least 20 percent down the lender will not require mortgage insurance.

The typical first-time U.S. homebuyer makes just a 6% down payment on their mortgage. But that frees up money for retirement savings. There are better ways to spend (or save) that money