Mortgages: Is a bigger down payment or the minimum down payment better?

Question

The minimum down payment is 20% but I can liquidate enough cash to pay 40%. Should I do as large of a down payment as possible to minimize my monthly payments? Or should I take out as much money as possible on a loan to maximize my deductible mortgage interest payments and subsequent tax benefits? Do these benefits outweight the costs of borrowing extra? And Is the extra cash on hand better off invested elsewhere than being put towards the down payment?

My credit score is excellent and I'm confident we can get good rates from lenders. We have some investments with decent returns but are not diligent investors that get outstanding ROIs on our portfolios.

Answer 1

If you can arrange for that much more cash, perhaps you should think about a 20% down now and a refinance later with the other 20%. You could use the second lump payment to negotiate a lower interest rate after you have a track record of payments.

If it doesn't work out, you could always use the second down to pay down the principal.

Answer 2

There is such a thing as being house rich and cash poor. You have to decide what is best for you, but leverage is the reason people put as little down on property as they possibly can.

You should check with a mortagage broker to find out what loan programs you are qualified for. Some are very fortunate and with the proper credit scores can get a 100# financing for the purchase of their home.

You will need the following when you see the mortage broker.

#1 One month of pay stubs for each person on the mortgage

#2 Two years federal income tax as well as the W-2's for the same years

#3 6 months of bank statements from each of the banks you do business with.

Now your house will appreciate in value over a certain period of time. You will be able to deduct, your federal taxes, the interest and county taxes as well as any points and fees you paid to get your loan.

So if you can get away with it, place as few of your hard earned dollars into your house as possible. If you feel as if you need to place something down keep it under or around 20%.

In my opinion the tax benefits and interest on your money invested elsewhere out weigh putting down more than 20% down.

As a matter of fact have you considered a duplex with a renter to assist you in paying your mortgage payment. Banks and lenders consider 1-4 units as a single family home so you would be getting the same interest rate. Your net worth would also increase with the purchase.


I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 3

With excellent credit, number one you should not have to buy points to get your interest rate down. Watch out for the mortgage brokers, some can be untrustworthy. They normally charge a lot to handle the mortgage, but some are good and do try to help you. Always ask up front what their normal fee is. Always shop around for the best rate. With good credit you could porbably get 100% financing, but if I had enough money I would pay at least 10 to 20 percent down. However, always leave enough money aside if something would happen you could pay at least six months in house payments. You must also figure that there will be closing cost added to the cost of the home unless you are purchasing from somebody that is willing to cover this. There will also be homeowner's insurance and property taxes sooner or later. If this is you first home try first time home buyers. I would finance on 20 or 30 years with smaller monthly payment. Again if something happens that you got out of work smaller payments are easier to make, just remember that if you pay at least 100.00 extra on principle per month on payment you can cut almost 10 years off of mortgage. Please be careful with whom you deal with, there are so many that will try their best to cheat you... We have a five year old past bankruptcy, credit score was so-so, but when I refinanced three years ago we got a 5.875 interest rate and I think I did well.. What I have always been told about refinancing never do it unless the rate drops a point from the rate your current mortgage is on. Good luck with buying a home. We have built two and I will probably owe for it when I die, but at least I have a home....

Answer 4

You will receive a better rate with a larger down payment. Just depends on the loan program.

Buying the rate down is not depending on your credit. The rate you get is related to your credit at times.

You can pay points because you want a lower rate. Lenders can only go so far down on rates before somebody has to pay points. If the lender is giving you a par rate you will have to pay a point so they get paid. If you do not want to pay any points you obviously will have a higher rate so the lender can make a living.

It's the same with brokers or bankers. Now if their rates are higher when you shop around then yes, they are probably trying to make more on the backside which means they are being paid by the lender in points.

Personally the 20% down is fine because it at least gets rid of the Private Mortgage Insurance although it is deductible for loans closed in 2007 now.

Just depends on your financial situation and if you need the lower payment with the additional down payment.

Answer 5

Most generally the bigger the down payment is, the lower the monthly payment is but at the same time you don't want to put all your money down and then fall into a financial bind. My husband is a loan officer for a mortgage company and can give some ideas as far as what options are open to you. If you would like his number feel free to email me.

Answer 6

If you can put down up to 40% and the down would not affect your financial stability , then I say go for it so it benefits the overall. But if there will be a tighter bind then I say look at 20-30% so to be above wasteful spending towards PMI. Hope that helps. If your credit is excellent and your finances are in order then I'd say you may want to look into something beneficial like the "simple loan" through Primerica..

Answer 7

The bigger downpayment the lower monthly payment. I suggest you pay as much as you can for the downpayment. In my case, i bought a home with a 0% downpayment, though its advantageous for those who have no money down, still the monthly payments suffer.

Learn from my experience...

that is only an advice..

good luck to you!

Answer 8

this could detemine on your investment objective. yet you ought to consistently % to take a place your money the perfect way conceivable. while you're figuring out to purchase this property to lease out, and you will have the money for the down cost, then you certainly ought to positioned a down cost sufficiently vast so the lease a miles better then the loan. yet whilst this could be a short term investment which you're gonna purchase and sell in a short quantity of time, then i could advise putting no money down and do exactly interest purely for 3 year. That conventional actual property is going up approximately 4%. you will make some income case you purely fix up the homestead alittle bit and re-sell it, then you certainly'll make money.