6 Reasons To Make A Bigger Down Payment On Your Home

6 Reasons To Make A Bigger Down Payment On Your Home

Deciding how much of a down payment to make when buying a home can be a challenge — and it can make a big difference in how much your ultimately home costs. The amount of money you pay up front determines how much your mortgage payment is. If you can afford to make a down payment that is larger than average on a home, should you do it? Check out the reasons you may want to make a substantial down payment.

 1. Easier Approval
Affording a large down payment is a sign of borrower strength and shows lenders that you know how to save. Since this is one of the best indicators of creditworthiness, you are more likely to get approved for a mortgage with a larger down payment. Further, if you are in a multiple-offer situation, offering the seller more money up front can be the key to outbidding other prospective buyers.

2. A Lower Interest Rate
Banks and lenders usually offer better interest rates when your loan-to-value ratio is lower. An increase in your down payment lowers this ratio and also lowers the lender’s risk. Lower interest rates can save you significant amounts of money over the life of a mortgage. (You can get an idea of how rates affect what you pay over time with this lifetime cost of credit tool.) The other major factor in lowering your interest rate is your credit score, so make sure you know where you stand before you apply for a loan. You can see two of your credit scores free every month on Credit.com.

3. Lower Monthly Payments
A bigger down payment means a smaller mortgage amount, which means lower monthly payments. This means more money in your monthly budget for the other facets of your life and again, fewer dollars of interest paid over time.

4. You Can Be Mortgage-Free Sooner
With more of the costs covered at the beginning, you may be more likely to pay the entire mortgage off in less time. With lower monthly payments, maybe you can even make extra principal prepayments. Paying off a mortgage early often makes financial sense and can help you be better prepared for retirement.

5. No Need for Mortgage Insurance
With small down payments (less than 20 percent of the home price), lenders usually require that you take out private mortgage insurance (PMI). This protects the lender if you are unable to pay down the line. The premiums are a cost that you avoid by making a large down payment.

6. Protection From Negative Equity
As too many homeowners found out the hard way during the last recession, home values can fall the same way they can rise. By having a greater percentage of your home paid off before you even move in, you minimize the likelihood that a price decline will put you into a negative equity situation. There are, of course, some reasons not to make a larger down payment — if you can get a greater return by investing that money elsewhere, for instance. It is important to understand, though, that if you can afford a larger payment or are willing to wait to purchase a home so you can save for one, you could pay less for your mortgage overall, pay your mortgage off faster and get better interest rates and terms in the bargain.


Ian Marshall Headshot
Author:
Phone: 770-361-7068
Dated: December 13th 2014
Views: 367
About Ian: ...

Property Search








RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

How To Get Get A Mortgage If You Are Self Employed - From how we’re expected to file ou
What You Need To Know About Fall Home Sales - Good for you if you deliberately sat
Invest In Edgewood Real Estate Now - Looking for an Atlanta Intown neighb
The Appraisal And The Home Buying Experience - The seller of that home you are abou

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

eXp Realty Georgia
1155 Mt Vernon Hwy Suite 800
Atlanta, GA
404-969-4670