The Benefits of a 20% Down Payment

By Fabi R. Gomes | July 1st, 2019

While some mortgage loans require a relatively low down payment—or none at all—there are benefits to saving a full 20% and applying that amount to your loan when shopping for a new home.

1. A lower interest rate.
Obtain a better rate and terms when making a 20% down payment. Why? The more confident your lender is in your ability to pay the loan, the lower the rate they can offer you. A buyer applying a greater amount toward his down payment is perceived as more financially stable than a buyer putting just 3-5% down.

2. Eliminating the need (and extra cost) of a mortgage insurance.
When a buyer ponies up a smaller down payment, the mortgage lender will require a Private Mortgage Insurance, which helps them recover their investment in the event that the buyer is unable to pay their loan.) The premium for this insurance is added to the monthly payment until 20% of the principal loan amount has been repaid. This cost can be eliminated by putting 20% down payment at the start of the loan.

3. A lower monthly payment.
Putting 20% down also means you are borrowing less for the same home. The less a buyer borrows, the lower the repayment will be over the life of the loan—which can drastically decrease your monthly payment.

According to a scenario, if a buyer purchases a $300,000 home with a 4.5% interest rate on a 30-year fixed mortgage, the buyer would be able to save $54,117 over the lifetime of the loan—simply by putting 20% down:

If you are looking to buy a home, consider the benefits of saving a 20% down payment vs. the time and cost of continuing to rent while you save that amount. Our CBHarper agents can advise you on which option may be best for you. Contact us now to set up a free consultation with one our licensed real estate professionals to determine the options that best fit with your long-term plan!

Coldwell Banker D’Ann Harper, REALTORS®  can be reached at (210) 483-7581 or and has been an affiliate of the Coldwell Banker franchise system for over 30 years. 

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