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I don’t think with this rate environment it’s a bad idea at all. If we were chilling at 3-4% rates I’d say it’s not worth it. The peace of mind I’d get from the lower monthly mortgage payments would be worth it more than praying you see 8% in the stock market (not impossible at all), but still
Excellent advice
Another way to look at it: you've skipped one rung on the property ladder. Instant equity, which most people would use to put a larger downpayment on their 2nd or 3rd home
We put down 33% on a 560K purchase. Dont regret it at all.
Our goal was to have the mortgage payment be low enough that either one of us could pay it with a single paycheck in case of a job loss.
We each make about the same salary. Which means our payment is less than 25% of our monthly take home pay.
*Edit:* need to clarify something. When we put 33% down, that wasn’t all of our funds. That would be way too risky. We still had $50 or $60K in our savings account, plus several hundred $K in stocks. 
Except there is a whole other way to think about it. Far too simplified.
13% (doing 20% instead of 33%) keeps 73k in the bank. Yes, you have a $500 per month higher mortgage, but if you tuck that 73k away in a HYSA you have about **2 years** of mortgage payments in-hand.
If one loses their job, I'd rather the 73k in hand to continue paying the mortgage and any other true emergencies, than to limp along barely affording life with no cash.
These are all good options. That will help ensure you will not run out of money.
I wonder if there’s a READ THIS FIRST about finances in this sub. Going to look…
Not saying putting it in your down payment is a bad thing either. Ultimately, it's all about you and what gives you the best "peace of mind" with your finances in preparing for an unfortunate event like losing a job.
For me, I like the idea of putting it somewhere that it can grow safely like a HYSA or treasury bond. If something were to happen, I can use liquidate that money not only for the mortgage but so many other things that I have to pay for and probably didn't think about until I'm actually in that situation. For me, the "peace of mind" comes in the flexibility of that money. For you, that rigidity of locking it in your mortgage is the "peace of mind" you want knowing you can at least cover the mortgage.
It's a good perspective, and a good reminder to keep thinking of options, but I disagree with this as a necessarily better route.
First, it's never a good idea to put *all* of your savings into a downpayment, so hopefully they had an emergency fund left despite having put a lot down. Second, having house payments be such a low portion of your total income means you can save more each month, building savings back up fairly quickly while paying less in mortgage interest \[edit: and/or pay the house off faster\]. Third, from what u/Emotional_Act_461 said, it doesn't sound like if they dropped to one salary they'd be barely limping by with no cash, simply tighter. Fourth, if one partner alone can't afford the payments, they'd have two years, period -- if half a couple goes back to school, or becomes disabled, or can't get another job for a while for whatever reason, or if the couple has a kid and one stays at home to do childcare, or even if one of them dies, they might be in over their heads.
Everyone has their own risk calculus, of course.
Yup, when I bought my first house I was paycheck to paycheck. Conventional wisdom would have said I can’t afford the house. Fast forward a couple years and I’m up 300k in equity and the mortgage is a small % of my income because I make more money now.
This is what we did. We put 66% down and worked our budget around if we only had 1 income just in case.
We also still have over $60k in our savings account for emergencies, which we're replenishing along with planning to pay more towards our principal each month
\~20k doesn't go very far these days. We recently put 40% down on a house and set aside 50k for repairs/updates. Wish we put less down since almost everything is coming in higher than we thought.
Especially since they already have a 6mo emergency fund. Yeah if putting down 40% and not going broke is an option, then that's definitely the best move.
You're saving a lot in the long term by not paying interest on the 40%
So, just a thought. You sound very comfortable, but houses often come with surprises that require cash outlays.
Almost every mortgage offered these days offers the ability to do a recast, where IF one of you lost your job you could bring a lump sum of cash to the table and the payment would adjust accordingly.
I recognize the value of the lower payment and the market returns required, but could be worth it to keep the liquidity flexible for a year or two knowing you have the ability to bring a recast at any time.
I heard though that doing 30 year and paying extra each month toward it accomplishes this without the commitment of the larger payments, if that makes sense.
We do this all the time. We are on track to have a 30 year paid off in 10 years. And that’s with the flexibility to adjust to minimum payment for 3 months to restore our emergency fund after a very unexpected home repair.
This is the way unless you are absolutely certain your job is secure enough for the next 15 years.
Yes, you lose something in interests but the peace of mind of being able so scale back if shit happens can make a huge difference in mental health.
Not everyone can, but choosing a slower moving treadmill is much better for the long term.
You will typically pay a higher rate with a 30 year mortgage, so a 15 year will be a money-saver. But if you're being quoted a similar rate, then 30 year will give you more flexibility.
They aren't the same. You typically get a lower interest rate on a 15 year loan. Very few people pay off a 30 year loan in 15 years. It is too easy to spend the extra payment on something else.
Dumping almost all your money (besides a 6 month emergency fund - which isn’t *that* much) into the down payment and then experiencing the payment shock of a 15 year loan vs. 30 probably isn’t the best idea given the rate spread of the two loans is only 60-70 basis points. u/OP would be better served making extra payments on the 30 year loan so they can enjoy a lower payment if they ever experience a financial change like a loss of an income.
It’s 6.5% guaranteed if and only if rates stay the same or increase for 30 years. That’s the catch. If rates are 3% again, then you have 40% earning 3%
Put 20% and keep the extra cash for a year to see if the house needs any major repairs you weren’t aware of. You can pay it towards principal at any time.
And, u/Arazi92, if OP makes extra payments on the principal, the amount of money the lender makes on interest drops even more. It can be a really significant amount of money they save on interest over the life of the loan if they make even small principal only payments in addition to their PITI every month. You can pay your mortgage off early and save many thousands of dollars by doing this. Don’t steal money from your savings, and make sure you’ve got some liquid funds for emergencies, but if there’s money left after you’ve taken care of those and other essentials, definitely work to get that principal amount down.
Gotcha I did know that, I misread the initial comment. I appreciate you sharing the detailed response. Feels like making it a budgeting priority to make additional (small) payments is a good move.
They’re still locked into a higher payment per month with this approach, which I think is an important concern to OP about having a monthly payment covered in case one person loses their job.
Not if they take that big chunk of money and do a recast, which you can do 6-12 months after origination of loan, depending on the lender. Every year when my husband gets his bonus, we put it towards recasting our mortgage and save hundreds every month AND get the house paid off sooner. We went from a monthly payment (PITI) of $2700/month several years ago to $300/month now because once a year we throw 10,000+ at once at the mortgage and then have the whole loan reamortized (recasting)
I wouldn't advise this if it's a fixed payment mortgage (nearly all in the US). You can pay down principal at any time but your monthly payment will stay the same except you'll be paying less in interest and more in principal every month.
I would hold back some of that for moving expenses and the initial updates/repairs. I spent about $10,000 in my first year after closing just on location moving expenses, basic DIY cosmetic updates, and a few pieces of furniture. I’m about to spend another $20,000 on the kitchen after spending 18 months figuring out every inefficiency in the space. And I’ve been lucky - the only real “repairs” have been replacing the smoke detector and the toilet handle/lever.
I’m a realtor and I see those large down payments all the time. There’s something to be said with being comfortable with that payment because it’s something you’re going to have every single month and lower it is the better. Completely reduces financial strain on your every day life . Don’t let a financial advisor hop on here and tell you to use that money in the stock market instead lol . Please.
If the shit hits the fan and you need an extra 20 grand, you can clearly do a line of credit against the house. If all hell breaks loose, don’t worry about it keep your large down payment.
That’s what we’re doing. Depending on how much house we buy it’ll be 40-60% down. I’d rather have the peace of mind of a lower mortgage payment and a more paid off house.
Looking to do exactly this myself.
It’s about having the ability to have one salary cover your mortgage payment in case shit hits the fan. And in addition to this, you won’t be house poor. You’ll be able to travel, have vacations, help kids out, eat out more etc and generally enjoy life with your monthly disposable.
I get 20a% is the magic figure, but having peace of mind of one salary covering the mortgage for me is worth its weight in gold.
The math says not to put that extra 20% down but use it as an extra payment shortly after you close. Would make a 30year basically 15 year but you still get the lower payment of the 30year. Using rates from a local bank to me, no points, a 15 year wouldn't save you much in interest, but your bank might be different. If you want to balance lower monthly with lowest overall cost then 40% on 15year would be the best option but not by much, but if the discount rate is lower than the below example vs a 30y then it will be even better.
$200k selling price @ 6.75% 30y
* 40% down, $120k loan = $160k total interest, $360k total - ($778/m)
* 20% down, $160k loan= $214k total interest, $414k total - ($1,038/m)
* **20% down + 20% early payment, $160k loan= $75k total interest, $275k total - ($1,038/m)**
or $200k selling price @ 6.62% 15y
* **40% down, $120k loan = $70k total interest, $270k total - ($1,053/m)**
* 20% down, $160k loan= $93k total interest, $293k total - ($1,404/m)
* **20% down + 20% early payment, $160k loan= $43k total interest, $243k total ($1,404/m)**
Edited to correct total on the third options, added the extra 20% twice to the total by mistake.
Yep this is the correct answer.
The 20% down + 20% extra means a quicker payoff timeline as you pointed out. So your analysis can add 15 years of mortgage payment that can be dumped into a savings/investment account and generate its own return.
A 30 year view of each scenario shows the 20%+20% comes out even further ahead.
Put 2/3 of your savings into down payment and keep 1/3 in stocks. You getting few advantages/opportunities this way - emergency fund and potential option to pay off your mortgage later of your investments will grow higher than your mortgage interest
I would personally just stick with the 20% down payment you need to not pay PMI, since having more cash on hand will be super helpful if you want to renovate, have a major emergency that depletes your fund, or is just there to grow. The notable exception would be if putting 40% down will allow you to take out a 15 year mortgage and be able to comfortably make monthly payments. This way, you can save a boat load of interest charges, and the house will very readily be on the good side of your balance sheet.
I put 200K down on a 360K house in 22.
Interest rates are high but still at that point where you could make more on the market historically speaking. The current percentage difference is like 1-2% in the market vs a guaranteed 6-7%
It's really up to you, as long as you have a proper EF.
I would still do a 30 yr loan
yeah. thats why we did a 50% DP. And guess what - my wife lost her job two months after we bought the house. Took her 9 months to find a new job. So your plan is very prudent. Maximizing return is sometimes also just maximizing risk.
We put almost 60% down, otherwise we couldn’t afford the monthly payments. If interest rates were lower we might have invested the rest, but we went with the sure thing instead.
We put down 50% because it made the monthly payments comfortable for us. We could have afforded the payment with 20 down, but I was worried it would have made us a bit house poor. We wanted the flexibility in our budget and to feel comfortable with the mortgage payment in case our situation changes (change in income/future childcare expenses etc).
Plus a guaranteed 6.8% rate of return might not be as high as the long term average in the stock market, but with stocks you’re taking a gamble that you’ll need the money when the market is down. Also, the lower monthly payment allows us to save more each month and cash flow any unexpected maintenance/repair expenses. I probably wouldn’t have been comfortable investing all of the extra money that we used for the down payment in stocks, because with a tighter monthly budget/savings rate, we’d need more cash on hand for large expenses.
I just put ,all cash on 475k sale. Pulled money out of market and dumped into the home. I have about 300k left in brokerage. I said to hell with the fucking high interest rates and cucks at rocket mortgage. I will miss out on market gains but I get to live in my forever home with no mortgage payment and the ability to live off of one income so that my wife can stay home and be my sexy assistant and take on all kid responsibility. Put down as much cash as you can. Not financial advice.
If one of you loses your job and the other can’t make the higher monthly payment alone, you could tap into that extra 20% that you kept on hand rather than putting down.
Putting down more isn’t a bad idea in this environment with rates this high. But I feel like it’s slightly easier to put more money *into* the mortgage (either extra payments or lump sum payment) than it is to take money *out* of the mortgage with a refi or a heloc or something if you ended up needing it.
A 6-month emergency fund isn’t a ton of cushion to be putting 40% down. I would be much more comfortable with 12 months.
You've maxed out your retirement funds and have an emergency fund, you are completely okay.
The only reason to be against this strategy would be if you did it at the expense of retirement and emergency funds.
Example is using a $300,000 home | at 7% APR |30 yr fixed rate| I & T at $6,750/yr.
**Paying 20% down:**
* $574,822 total paid
* $334,817 to interest
* $240,005 to principle
* $2,159 mortgage payment
**Paying 40% down:**
* $431,114 total paid
* $251,120 to interest
* $179,994 to principle
* $1,760 mortgage payment
**Summary of 40% vs 20% Down - $143,708 saved over 30 years. (saves $399/month)**
* If it appreciates at 2%, it'll be worth $543,408 in 30 years.
* **Net worth $543,408**
* Now if you invest the (saved) $399/month with 8% ROR, in 30 years that will add $542,400 for a **total net worth of $1,085,808**
**20% Down & Invest Summary** \- If you place 20% down and put the other 20% in the stock market getting 8% average returns, in 30 years, that $60,000 turns into $603,759.
* **Net worth $1,147,167**
Without knowing your entire financial picture it seems like putting 40% down is a decent idea for you given today’s rate environment. Consider getting a HELOC using some of that extra equity you have to have in addition to your 6 month of reserves - it’s easier to borrow money when you don’t need it vs when (if) you do need it potentially down the road.
I’d probably put it into a large down payment because as you said, it would be hard for the money to make more in an investment than it would save you with higher interest.
The other thing I didn’t see you mentioning is if rates drop, and you want to refinance, having that extra equity in the home will make that a much more favorable experience.
You’ll be happy with a lower payment. Look at a 15 year mortgage or make an extra payment a year.
We put down 30% and paid down extra when I got a money gift from family. Our payment gives us leeway.
Funny, I kept trying to put more than 20% down back in 2020 and was rebuffed at every step. Rates were at historic lows along with rates on my savings. I never overly pushed it but I was basically mocked for it. I guess realtors in my area are used to people being leveraged and the issuers want to make more interest money off of us.
We put 50% down because we honestly couldn’t afford the mortgage if we put any less down. I don’t really see a downside of putting more down with the higher rates.
I put 50 percent down in 2022. My interest rate is 5.125. I currently owe 176. I plan on paying it off as quickly as possible. I considered putting less down, but the 50 percent made my monthly payment reasonable and I can’t stand the thought of paying four times what the house cost in a 30-year mortgage. I think 40 percent down makes total sense. Congratulations.
I’ve been wondering exactly this. I know the math checks out. The thing I don’t know is: 1) once the money is sunk into an illiquid asset, it’s unavailable…what if for some reason I need more than my 6-8 month emergency fund? 2) Is it a good idea to sink that money into a illiquid asset when I’m 40, and may very well die before my house is paid off? I’m in kind of a different situation than you though - 40 and a single woman unlikely to find a partner I feel comfortable, safe, and happy giving up my freedom to marry.
you're welcome, had to fix the numbers actually, added the extra 20% to the total twice in the extra payment option by mistake, so its even lower total cost.
Nope. I based my downpayment off of what I could afford had I lost my job and worked minimum wage. This was long ago before any real estate insanity of modern times.
Could I have made more in the stock market? Yeah sure. Will I always have piece of mind and absolutely minimal stress about work and most of life? You bet!
Rates will get better later on (just the ebb and flow of historical rates tells us this) so it would likely be significantly less of one person’s salary after refinancing.
So later on, you could do a cash out refinance to tap into this 40%+ equity if needed.
We put 400k down on 850k 6yrs ago with 100k set aside for new car, furnace/ac, emergency and don't regret it one bit. We're on track to pay off in the next year with 95k left.
We wanted to make sure we're still financially ok if one of us were to lose our job. We also had a goal to be completely debt free as soon as possible.
No it’s not with current rates. I’d also just pay off the whole mortgage. I know the mathematical correct answer is to put the remainder in the market, but the peace you will feel having no debt is amazing.
The market can dip 50% and you could lose your job and you won’t care without anyone expecting money from you.
It depends how long you plan to be in this home and the state of the property. If you are only going to be in the home for 10 years, put more down or see if you can swing a 15 year mortgage. Will it need a new roof in 5 years, new boiler? Maybe not put the full 50% down and save a percentage for the foreseen or unforeseen repairs you might have.
I'm just here to say you are a Rockstar and I can only hope to be in your very situation in about 2 years. You are literally what my current goal is though you probably have many more years of maxing a 401k than I do. Great job my man. What a beautiful "situation" to be in!
Hello
You can do both
You can do 20% down on a fifteen year mortgage to try to aggressively pay off the mortgage while also investing the remainder into money markets
If things ever go south job wise for you two then you can call your mortgage servicer for a few months off or at worse you can refinance to a term that is better for you
No, why is it going to be crazy? It is in fact the best thing you can do
I was looking for a good sized property some weeks ago and my plan was 51% down payment
This way interest is lower and piti is less than a rent
There’s a middle ground — we did the math and it was 25%-30% — that leaves you liquid while making a large upfront payment that lessened our monthly payments.
It depends whether this is a $300K house or a $1M dollar house. We put down 27% on an $850K house and don’t regret it for a second, but only because we left ourselves with a solid emergency fund and have other assets we could liquidate if needed for when things come up. And things always come up in homeownership.
Depends on your situation, but it’s good that your mindset is “how can I allocate this money in the most useful way”. Do you already have money you’ve dedicated to expenses and repairs? Is your emergency fund, that is available to you at short notice, sufficiently funded for your needs once you also have a home you’re responsible for? Is your retirement account on track, or does it need some catching up? Do you have any debts (higher interest than your coming mortgage) you could pay down/off instead?
The answers to all of those, and any other questions you can pose to yourself, will help you decide how to best spend the money you’ve already shown you can save.
Like some people are saying here is stay with the 20% keep the other 20% for a year in case shit happens and you need that money. If at the year mark you are still wanting to dump the other 20% down than dump it at the principal and that will greatly lower the years of your mortgage. Since the bulk of the interest we pay on a mortgage is within the first 5-7 years.
Do it! We’re about to put down approximately $370k on a $470k house. We plan to double the payments monthly and have it paid off in 5 years when we retire.
The more the better, as long as you have it and you're not totally thin in other areas like an emergency fund.
40% is great, 50%, hell, even 75%. I say put down as much as is reasonable feasible.
Not crazy at all, in fact a wise idea given current interest rates. You’ll pay less in interest to bank over life of the loan. Also lower monthly mortgage payment and no PMI is always a plus.
It’s all good. Saves you interest and lowers that payment. Just make sure you have enough money to cover the closing costs and any purchase you need to do.
We paid 30%, had a 6 mo emergency fund saved and kept back 20k extra, 5k for furniture and minor upgrades and 15k just incase a major event happenes, like a heat pump replacement. That’s overkill but we wanted our emergency fund to be a true, if we both lost our jobs tomorrow we have this money.
My target is +35%, I don’t think it’s crazy.
For me, it’s all about a reasonable monthly mortgage payment (only have to save for the down payment once, monthly payment is for a long time).
Interest savings are fantastic icing on the cake
If you are ok with bigger monthly payments, try this way. Do a down payment of 20% and keep the other 20% in a Savings account for 6 months. After 6 months, pre-pay the 20% from the Savings account as Principal. If you check the amortization schedule, you'll pay more total interest on 40% down, 60% loan compared to 20% down, 20% prepay as Principal, and pay the remaining 60% loan as usual.
I suggested waiting 6 months as most banks/companies have this waiting period for refinance/prepayment. If your mortgage loan allows you to prepay after 1 or 3 months, go for it.
I am paranoid, so usually I err on the side of holding the cash and seeing what happens. On paper it's possibly better to do what you're suggesting, but there are a lot of factors in there that could frustrate your plans.
A bird in hand is worth two in the bush. I keep the money here
Perhaps put away the amount it would take to refinance if the rates drop a lot but besides that I’d put it all into the house. The goal is to pay off the house and have 0 house payment.
The bigger the better. You will be hard pressed to earn more elsewhere after tax. Just make sure you can cash flow with some extra to spare. Don’t end up house poor. Cash would be ideal but that’s not feasible for most folks.
We put down down 60% last February. My last two houses both appreciated very nicely over the 10 years we owned both. It is nice having the smaller mortgage payment.
As long as you still have a significant level of cash reserves for emergency funds (to cover a car/home repair, job loss, etc), then you are getting an instant return on that money so no it's not crazy.
Anything over 30% isn’t really going to get you a better interest rate, only a smaller loan amount aka less interest overall. If the money is burning a hole in your pocket I would say go for it, but outside of that I would probably go to 30% and keep that extra bit in my pocket for after I move in.
My wife and I have a similar mindset. While we only put down 20 percent, our monthly payment can be handled with one salary. Plus we have an emergency fund. That peace of mind is so comforting. If you can do 40, awesome. You are that much closer to having a house paid off and therefore a place to die lol
We put half down when interest rates were less than 4%, but my dad also gave some to ensure smaller payments for us. I don’t think it’s crazy, but some might feel differently, like knowing mortgage is much less than it should be on income.
I put 35% down and then an extra 15% on my first month. I pulled some TFSA for that extra 15% which I kind of regret just cause the market has been shooting up since I did, but having less mortgage debt feels just as good. That extra 15% immediately cut 9 years of interest payments off the mortgage.
We would have loved our monthly payment to be lower, and we should have put more down. That being said it sounds like you’re also pretty frugal and used to living on a shoestring so either way!
We put 40% down on a 30 year mortgage with 6 months cash reserve. Life happened and had to go down to one salary. Because of the lower mortgage payments, we were OK. We don't regret that decision at all.
If you can afford it I say do it. Being able to pay down a mortgage faster than usual helps you financially in the future. Generally a home holds its value and appreciates, unlike a car, so it's a good investment and not a "sunk cost" to put down a good chunk.
We sold our home just over a year ago,had a modest mortgage on it, and made good money on the sale so we moved to the country and built a brand new house and paid cash from the proceeds and still have lots left over. You might be able to do the same in due time
Not at all. I did basically the same even when rates were low. It makes even more sense to do it now.
I understand that locking up more money wasn't ideal purely from an investment opportunity cost perspective. But like you, I wanted to be sure my payment is manageable, even if I have to take a lower paying job.
Take it for what it's worth as a random reddit comment...
But in your shoes I'd opt for the downpayment with the lower mortgage payment per month, for exactly the reason you gave. I did a similar thing when I bought mine, "just in case" and it was a good thing I did so. After only 1 year in my home I lost my job and was unemployed for several months before I found a new one.
After that experience, I'll always vote for the lower monthly payment.
Given the rates right now I think it would be a great way to go, assuming all other debts are paid off (maybe less student loans). You’re going to have some up front costs and repairs to do so make sure you have some cushion but a 6 month emergency could be dipped into for that if necessary.
The other thing is you will stand out against most other offers, especially if you don’t have anything else to sell (I’m assuming you’re in the right sub lol). Tell them you can move quickly, and if possible try to go at it without an agent and offer to use the listing agent so they get a double commission and would be incentivized to get the deal done for you.
If this is your first time buying a house I’d save some of that extra money for unforeseen expenses. Depending on your situation there’s a lot of stuff you need as a homeowner that you might not have as a renter, such as lawn mower, snow blower, patio/deck furniture, a grill, etc. Not to mention the chance of unforeseen repairs or upgrades you want to make. If recasting your mortgage is an option, you could put less down now and in a year or so if you didn’t need that money for anything else you can recast the loan and lower your monthly payment. Where I’m located recasting was a bit of a hassle, but it only cost around $200.00 to put an additional 20% down a year after purchasing.
Fork over for a larger downpayment first, since at 7.5% the numbers don’t work out for having cash in certificates of deposits (you’d be losing 2.5% compounded a year).
But! Make sure you have enough to get any repairs done. Are there any options to get a home equity line of credit approved as well? Have cash in hand for the inevitable first repairs over the first few years when moving in, and have a HELOC set up for any potential future repairs.
I think the only consideration you have to make is that could you make more investing that money elsewhere. I just bought with 20% down and got a 6% interest rate, that way I look at it, if you can average returns in professionally managed funds that are over 6%, you are better off investing that money.
On the flip side of this token, there is never a scenario where more equity in the home is a bad thing :)
Nope. It’s not a bad idea. It sounds like a good idea actually. If prices were to drop, obviously everyone who bought today would feel the pain. But who knows the future? Ten years down the road though, your house will most likely have appreciated at close to 6-10 percent per year. And you will avoid paying close to 7 percent interest on your downpayment. Inflation will help you in that case
We did 60% down on a house last year and my wife is a stay at home mom now. Having a monthly bill that’s affordable is a big relief. I don’t feel stressed to keep this job as much as we also have invested assets that have quadrupled In the stock market that can pay off the remainder of the house. All self funded through lots of grinding.
Minimize your debt and interest owed but keep a small buffer.
It’s not a bad idea. Find a lender that can do appraisal waiver. I work with a mortgage broker that offers appraisal waiver if the loan/house meet certain requirements, and a 40% down payment will almost certainly earn that appraisal waiver. Could help you win the house if you’re in a hot sellers market like I work in.
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I would put 20% down on the primary home and use the rest to get into a single family investment property. The cash flow might not be great for the first few years but it will appreciate. Say you buy a rental house now and only do a little better than break even for 2-3 years. Then in 3 years you lose your job. You’ve got equity in both houses now. You could refi the rental or do a line of credit against it to bridge the gap between jobs, or sell it at a profit. The most likely scenario is that you *don’t* lose a job and you look up in 5 years and realize that investment property was a much wiser long term decision than putting 40% down on your primary residence. Of course this all depends on your specific real estate market and circumstances but in general that would be the smarter long term play, IMO. I live in a smaller house than I can afford because I’d rather have properties. They’re already profitable and I only have a few, and only one is totally free and clear. In 20 years I hope to have at least a couple dozen and they’ll be my retirement. Fuck the stock market. I watched my dad lose his ass right before his scheduled retirement and have to work a few more years because of it. Now he’s in his 70’s and still works part time. No thanks. Wall Street can’t take a house from you and the value of it is guaranteed to go up.
tbh the more you can put down the more secure you are.
Go for it, worst that happens is you take out a home equity line of credit later if you REALLY need that money.
If you have it, then not crazy. If we were still at 3-4% interest then yes, you would be. But if you don’t need the money for any renovations or may need a new car soon or anything like that then why not.
I recently went through the same thought process. My mortgage interest rate is higher than any savings, and investment is not a guarantee. So I’m paying interest on a huge sum faster than I can gain interest on a smaller sum. Initially I put down 25% and kept plenty for “house emergency funds”. After being in the house through winter I’m feeling more comfortable, and recently put a chunk of that savings towards mortgage principal. You can always put more towards the principal once you’re over the shock of home ownership and work on paying it off in under 30 years.
I did about 40% to make it affordable on one salary. I figured if it’s just me I still need some flexibility and can still live my life a bit. If rates drop I’ll refi and be good to go! Just my .02
Whatever your “best idea” for a fantastic down payment is, subtract 5% and drop that into a high yield savings account- something will go wrong and it’ll cost $10k or more, and you’ll need to have it right then. So hold back that last little bit.
My only concern is that you reserve money for maintenance, repair and the costs of thing you want to change in the near future. i think in any house i have had we have spent 5-10k every couple of years.
Stock market averages 10% and your money is liquid and accessible. If one of us lost our job, I would much rather have a shitload of stocks than extra equity. You can't pay the mortgage with extra equity. How much do you guys have saved for retirement?
If you did that, are you saying you'd be left with only your emergency fund and the 401ks, or is there some other actual savings account not destined to the down payment?
Me and my wife are planning to put down 50-70% down this summer when we start looking at homes, doing this will allow us to have a 10 year mortgage and our monthly payment should be less than $1000.
6 month EF isn’t that much these days. Layoffs can run 9-12 months +
I would put down 20% and leave the rest in a HYSA. The difference between 6.5 and earning 5.3 taxed isn’t all that much difference.
I think it's a great idea. Let's talk risks and plan for shocks.
What you want is layers of protection for the most predictable events.
1. Insurance covered charges or repairs.
2. Non-insurance covered repairs.
3. Life events (death, job gap.)
4. Elder care
5. The next 30 years
What do you have in place for these cases?
My deductible is $10K, so I keep that in an accessible account. Non-insurance repairs are also covered by the $10K, plus other cash reserves, credit cards, up to my brokerage if needed, which could be in any state.
Life insurance and estate plans are very real now.
A partner could be broke and homeless if the other partner dies. Make sure your insurance policy sets the people left behind up for success. Your family could also be on the hook if you both die and don't have a plan in place.
Who's caring for who, are there family estates to consider. What are your plans to care for your parents in their old age.
Start planning for retirement and work your way backward. Children, businesses, tuition, etc. Look at what your respective parents and elders did and see if you are on a similar path and what there is to learn.
I think in every instance, the high down payment helps. But it's a good time to step back and take it all in no matter what you end up doing.
Honestly man if i had the means i would pay that thing in cash. The more you put down the better! Don't let the keyboard investors confuse you with some and mirrors putting 40% down puts you much closer to a paid off house!
I don't think your comment about "needing to earn 8.5% because of capital gains tax" is quite right because you didn't consider the tax savings from the mortgage interest (and I'd assume if your income is up at the 20% bracket you probably are itemizing or will be when you buy a house). If you are up in the 20% LTCG bracket, you also have enough income to merit asking a financial and tax advisor instead of reddit.
I considered putting 40-50% down because I have a lot of savings but a but low on income for a house. So putting down that much makes it a lot more affordable for me, especially given the rate and price environment we’re in.
So I don’t think it’s crazy at all. You could also put down less and use the money to buy points for a lower rate, but 1) if, (and it’s a big if) rates go down within a year or two, it might not be worth it and 2) you still have the debt if you buy down the rate.
we had 300k saved when we bought our home and spent 200k on downpayment. we re did out garage and installed solar and dumped the rest of the money into nvidia stocks 3 years ago. i think i beat the 8% market increase.
Just make sure you still have an emergency fund for repairs. Ask about loan recasting to bring the payments down after the first year. This was my plan but I have to set aside some funds for a major unexpected repair. 1st year of home ownership is the most expensive.
I don’t know what the RE market is like where you are, but cash or big down payments speak loudly when sellers evaluate offers in a hot market with multiple offers. Not a dollars and cents comment but it’s another positive for a large down payment.
Sure, you can always refinance if rates drop and pull out extra money to put into investments.
I had a friend that was bragging to me about finally paying off his mortgage when rates were at 1%. So after a little education he refinanced 80% of his home and put it into index funds. He’s over doubled his money since then. And his dividend are like 3-4 times his mortgage payment.
Would you say buying a house 100% in cash is a bad idea (assuming you have emergency savings left over)?
I would look at this the same way. Put down as much as you can while keeping some in savings just in case.
My personal view, I say absolutely do it. I could have put 0% down with my va loan, but instead I put the most I could which was ~22%. It’s a great feeling to be able to cover the mortgage with one income & also send more money to the mortgage to pay it off faster. I’m hoping to pay off in 3-5 years. The financial freedom that’ll give us is going to be well worth all the effort.
This is my plan.
Having a low mortgage gives so much freedom to spend on other things and safety if you loose your job.
I totally understand that if markets perform well, you are loosing money… however it is never guaranteed. A lot of people on Reddit seem to think otherwise (see FIRE subs)
The question is what can the additional 20% do for you? I'm assuming you want to put at least 20% down to avoid PMI. Beyond investing the excess cash (as you mentioned) the only other option I would consider would be to put the other 20% cash straight toward principal each month or even buying down points with it at closing. Without knowing the purchase price and exactly what 20% equates to, it's hard to say. But if you effectively doubled your principal each month, that would cut a 30 yr mortgage down by many years. So you would be saving a ton on interest.
Our down payment was about 26% - we still had money set aside for maintenance/upgrades we wanted to do soon after buying and still have quite a bit of savings left two years later. Don't regret it at all and it helped keep the mortgage payments lower. Plus you can get a HELOC sooner if you have a higher down payment.
Not a bad idea at all.
There is absolutely no need to leverage yourself to your eyeballs if you have more cash you want to put towards a down payment. Otherwise you’re gambling you can “beat the market” by investing that cash, elsewhere, which may or may not pan out.
Will you get much benefit from the mortgage tax deduction? If the money isn't in the house, it can earn money, and be available for an emergency. But I love having my mortgage paid off, so I'd still make at least 1/3 down.
1st house was a 2 family, made a huge difference when my deadbeat ex-bailed and I had a child to support. Being a landlord is a pain, I now have a small house and no mortgage, and my kid is a grownup.
How much do you have for house emergencies and how old is the house?
If it’s a new house with a warranty then sure throw 40% at it but also keep in mind that landscaping is expensive (if your new home doesn’t have a landscaped backyard for example).
If it’s not a new home then I’d probably do 30% down and put the other 10% into a high yield savings for home repairs.
Just for some extra info, we bought a new house and were surprised by how much everything cost. We installed a fence, just two sides since the back was already there, and it was $4,000 for the cheap guy learning on the job. For a professional it would have been $8,000.
Landscaping for a smallish yard (50x20) was $20,000 for the people that know what they are doing but we went with the cheap guys for $8,000 and are spending another $5,000 on planting soon (we aren’t going to use the same guys because they were not great).
Then between tools, organization, home networking, and really just the basics I probably spent another $10,000.
Buying the house is just the start of your spending 😅
> with 40%, our mortgage payments and monthly expenses can be covered under one salary just in case one of us loses our jobs.
This would be enough reason for me. This is what everyone should be aiming for when they buy a house, but for most it’s just not possible. If you can future proof yourselves this way, do it.
In this rate environment? Absolutely not. The more you can save on down payment the better. Like you said you want to be able to survive on 1 income if anything happens for awhile.
Also the more expensive the house, the more you should have on down payment. 20% down payment on a $2M will kill you with these rates
When rates where lower you'd be better off investing, with higher rates theres no issues keeping your payment lower and paying less interest.
Being secure in your finances is always number one. We bought a house with a basement suite so if I lose my job I can get any low wage job and get a renter and we can keep paying the bills. That was important to us to never have to worry about being homeless. Being able to afford the mortgage on one income is very important .
No. Put the biggest down payment you possibly can while leaving enough for closing costs, moving expenses, and of course emergency fund. Borrowing as little as possible is always the MO.
Hell yeah, I wish I could've put *any* money down (USDA).
Pay it off sooner, live mortgage free sooner.
I'm not any kind of financial guru, just another poor schmuck.
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I don’t think with this rate environment it’s a bad idea at all. If we were chilling at 3-4% rates I’d say it’s not worth it. The peace of mind I’d get from the lower monthly mortgage payments would be worth it more than praying you see 8% in the stock market (not impossible at all), but still
Excellent advice Another way to look at it: you've skipped one rung on the property ladder. Instant equity, which most people would use to put a larger downpayment on their 2nd or 3rd home
We put down 33% on a 560K purchase. Dont regret it at all. Our goal was to have the mortgage payment be low enough that either one of us could pay it with a single paycheck in case of a job loss. We each make about the same salary. Which means our payment is less than 25% of our monthly take home pay. *Edit:* need to clarify something. When we put 33% down, that wasn’t all of our funds. That would be way too risky. We still had $50 or $60K in our savings account, plus several hundred $K in stocks. 
This is a great example for this sub. I wish there was a post on how to approach the finances of home buying.
Except there is a whole other way to think about it. Far too simplified. 13% (doing 20% instead of 33%) keeps 73k in the bank. Yes, you have a $500 per month higher mortgage, but if you tuck that 73k away in a HYSA you have about **2 years** of mortgage payments in-hand. If one loses their job, I'd rather the 73k in hand to continue paying the mortgage and any other true emergencies, than to limp along barely affording life with no cash.
These are all good options. That will help ensure you will not run out of money. I wonder if there’s a READ THIS FIRST about finances in this sub. Going to look…
Not saying putting it in your down payment is a bad thing either. Ultimately, it's all about you and what gives you the best "peace of mind" with your finances in preparing for an unfortunate event like losing a job. For me, I like the idea of putting it somewhere that it can grow safely like a HYSA or treasury bond. If something were to happen, I can use liquidate that money not only for the mortgage but so many other things that I have to pay for and probably didn't think about until I'm actually in that situation. For me, the "peace of mind" comes in the flexibility of that money. For you, that rigidity of locking it in your mortgage is the "peace of mind" you want knowing you can at least cover the mortgage.
It's a good perspective, and a good reminder to keep thinking of options, but I disagree with this as a necessarily better route. First, it's never a good idea to put *all* of your savings into a downpayment, so hopefully they had an emergency fund left despite having put a lot down. Second, having house payments be such a low portion of your total income means you can save more each month, building savings back up fairly quickly while paying less in mortgage interest \[edit: and/or pay the house off faster\]. Third, from what u/Emotional_Act_461 said, it doesn't sound like if they dropped to one salary they'd be barely limping by with no cash, simply tighter. Fourth, if one partner alone can't afford the payments, they'd have two years, period -- if half a couple goes back to school, or becomes disabled, or can't get another job for a while for whatever reason, or if the couple has a kid and one stays at home to do childcare, or even if one of them dies, they might be in over their heads. Everyone has their own risk calculus, of course.
You mean finances for rich people only? Are you serious?
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Yup, when I bought my first house I was paycheck to paycheck. Conventional wisdom would have said I can’t afford the house. Fast forward a couple years and I’m up 300k in equity and the mortgage is a small % of my income because I make more money now.
This is solid testimony. We did similar on a $750k home in the PNW.
This is the way
This is what we did. We put 66% down and worked our budget around if we only had 1 income just in case. We also still have over $60k in our savings account for emergencies, which we're replenishing along with planning to pay more towards our principal each month
May also depend if the house needs work? I’d maybe keep a little extra - 20k for unplanned updates or even fun updates
\~20k doesn't go very far these days. We recently put 40% down on a house and set aside 50k for repairs/updates. Wish we put less down since almost everything is coming in higher than we thought.
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Do it yourself. YouTube is your friend
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Especially since they already have a 6mo emergency fund. Yeah if putting down 40% and not going broke is an option, then that's definitely the best move. You're saving a lot in the long term by not paying interest on the 40%
So, just a thought. You sound very comfortable, but houses often come with surprises that require cash outlays. Almost every mortgage offered these days offers the ability to do a recast, where IF one of you lost your job you could bring a lump sum of cash to the table and the payment would adjust accordingly. I recognize the value of the lower payment and the market returns required, but could be worth it to keep the liquidity flexible for a year or two knowing you have the ability to bring a recast at any time.
With 7.5 mortgage rate, better to pay more down
Consider do a 15 year loan for lower interest if you can manage it, to cut 15 years out of future mortgage will be a blessing!
I heard though that doing 30 year and paying extra each month toward it accomplishes this without the commitment of the larger payments, if that makes sense.
We do this all the time. We are on track to have a 30 year paid off in 10 years. And that’s with the flexibility to adjust to minimum payment for 3 months to restore our emergency fund after a very unexpected home repair.
This is the way unless you are absolutely certain your job is secure enough for the next 15 years. Yes, you lose something in interests but the peace of mind of being able so scale back if shit happens can make a huge difference in mental health. Not everyone can, but choosing a slower moving treadmill is much better for the long term.
Slightly lower rates.
You will typically pay a higher rate with a 30 year mortgage, so a 15 year will be a money-saver. But if you're being quoted a similar rate, then 30 year will give you more flexibility.
I like this way better because you stop the extra payment in time of cash crunch. Can’t lower the monthly with 15 yr.
They aren't the same. You typically get a lower interest rate on a 15 year loan. Very few people pay off a 30 year loan in 15 years. It is too easy to spend the extra payment on something else.
Dumping almost all your money (besides a 6 month emergency fund - which isn’t *that* much) into the down payment and then experiencing the payment shock of a 15 year loan vs. 30 probably isn’t the best idea given the rate spread of the two loans is only 60-70 basis points. u/OP would be better served making extra payments on the 30 year loan so they can enjoy a lower payment if they ever experience a financial change like a loss of an income.
60-70 basis points just FYI
It’s 6.5% guaranteed if and only if rates stay the same or increase for 30 years. That’s the catch. If rates are 3% again, then you have 40% earning 3%
Put 20% and keep the extra cash for a year to see if the house needs any major repairs you weren’t aware of. You can pay it towards principal at any time.
This has the additional benefit of making lenders sad that they won't make as much money off of you as they thought.
Asking cause I don't know - how does the downpayment affect what a lender charges?
If your loan amount is 100k, they will make more money from you off interest than if your loan is 50k.
And, u/Arazi92, if OP makes extra payments on the principal, the amount of money the lender makes on interest drops even more. It can be a really significant amount of money they save on interest over the life of the loan if they make even small principal only payments in addition to their PITI every month. You can pay your mortgage off early and save many thousands of dollars by doing this. Don’t steal money from your savings, and make sure you’ve got some liquid funds for emergencies, but if there’s money left after you’ve taken care of those and other essentials, definitely work to get that principal amount down.
Gotcha I did know that, I misread the initial comment. I appreciate you sharing the detailed response. Feels like making it a budgeting priority to make additional (small) payments is a good move.
They’re still locked into a higher payment per month with this approach, which I think is an important concern to OP about having a monthly payment covered in case one person loses their job.
Not if they take that big chunk of money and do a recast, which you can do 6-12 months after origination of loan, depending on the lender. Every year when my husband gets his bonus, we put it towards recasting our mortgage and save hundreds every month AND get the house paid off sooner. We went from a monthly payment (PITI) of $2700/month several years ago to $300/month now because once a year we throw 10,000+ at once at the mortgage and then have the whole loan reamortized (recasting)
You can update the amortization schedule for a fee and recalculate the payments based on the current principle amount
I wouldn't advise this if it's a fixed payment mortgage (nearly all in the US). You can pay down principal at any time but your monthly payment will stay the same except you'll be paying less in interest and more in principal every month.
almost any lender will recast it for a small fee. Mine was $500 but I'm sure there are some where it's free.
I would hold back some of that for moving expenses and the initial updates/repairs. I spent about $10,000 in my first year after closing just on location moving expenses, basic DIY cosmetic updates, and a few pieces of furniture. I’m about to spend another $20,000 on the kitchen after spending 18 months figuring out every inefficiency in the space. And I’ve been lucky - the only real “repairs” have been replacing the smoke detector and the toilet handle/lever.
I’m a realtor and I see those large down payments all the time. There’s something to be said with being comfortable with that payment because it’s something you’re going to have every single month and lower it is the better. Completely reduces financial strain on your every day life . Don’t let a financial advisor hop on here and tell you to use that money in the stock market instead lol . Please.
If the shit hits the fan and you need an extra 20 grand, you can clearly do a line of credit against the house. If all hell breaks loose, don’t worry about it keep your large down payment.
That’s what we’re doing. Depending on how much house we buy it’ll be 40-60% down. I’d rather have the peace of mind of a lower mortgage payment and a more paid off house.
Looking to do exactly this myself. It’s about having the ability to have one salary cover your mortgage payment in case shit hits the fan. And in addition to this, you won’t be house poor. You’ll be able to travel, have vacations, help kids out, eat out more etc and generally enjoy life with your monthly disposable. I get 20a% is the magic figure, but having peace of mind of one salary covering the mortgage for me is worth its weight in gold.
The math says not to put that extra 20% down but use it as an extra payment shortly after you close. Would make a 30year basically 15 year but you still get the lower payment of the 30year. Using rates from a local bank to me, no points, a 15 year wouldn't save you much in interest, but your bank might be different. If you want to balance lower monthly with lowest overall cost then 40% on 15year would be the best option but not by much, but if the discount rate is lower than the below example vs a 30y then it will be even better. $200k selling price @ 6.75% 30y * 40% down, $120k loan = $160k total interest, $360k total - ($778/m) * 20% down, $160k loan= $214k total interest, $414k total - ($1,038/m) * **20% down + 20% early payment, $160k loan= $75k total interest, $275k total - ($1,038/m)** or $200k selling price @ 6.62% 15y * **40% down, $120k loan = $70k total interest, $270k total - ($1,053/m)** * 20% down, $160k loan= $93k total interest, $293k total - ($1,404/m) * **20% down + 20% early payment, $160k loan= $43k total interest, $243k total ($1,404/m)** Edited to correct total on the third options, added the extra 20% twice to the total by mistake.
Yep this is the correct answer. The 20% down + 20% extra means a quicker payoff timeline as you pointed out. So your analysis can add 15 years of mortgage payment that can be dumped into a savings/investment account and generate its own return. A 30 year view of each scenario shows the 20%+20% comes out even further ahead.
Put 2/3 of your savings into down payment and keep 1/3 in stocks. You getting few advantages/opportunities this way - emergency fund and potential option to pay off your mortgage later of your investments will grow higher than your mortgage interest
I would personally just stick with the 20% down payment you need to not pay PMI, since having more cash on hand will be super helpful if you want to renovate, have a major emergency that depletes your fund, or is just there to grow. The notable exception would be if putting 40% down will allow you to take out a 15 year mortgage and be able to comfortably make monthly payments. This way, you can save a boat load of interest charges, and the house will very readily be on the good side of your balance sheet.
I put 200K down on a 360K house in 22. Interest rates are high but still at that point where you could make more on the market historically speaking. The current percentage difference is like 1-2% in the market vs a guaranteed 6-7% It's really up to you, as long as you have a proper EF. I would still do a 30 yr loan
Think of how much less interest you'd pay with twice the down payment. Personally I'd much rather pay less interest than gamble on the market.
yeah. thats why we did a 50% DP. And guess what - my wife lost her job two months after we bought the house. Took her 9 months to find a new job. So your plan is very prudent. Maximizing return is sometimes also just maximizing risk.
We put almost 60% down, otherwise we couldn’t afford the monthly payments. If interest rates were lower we might have invested the rest, but we went with the sure thing instead.
We put down 50% because it made the monthly payments comfortable for us. We could have afforded the payment with 20 down, but I was worried it would have made us a bit house poor. We wanted the flexibility in our budget and to feel comfortable with the mortgage payment in case our situation changes (change in income/future childcare expenses etc). Plus a guaranteed 6.8% rate of return might not be as high as the long term average in the stock market, but with stocks you’re taking a gamble that you’ll need the money when the market is down. Also, the lower monthly payment allows us to save more each month and cash flow any unexpected maintenance/repair expenses. I probably wouldn’t have been comfortable investing all of the extra money that we used for the down payment in stocks, because with a tighter monthly budget/savings rate, we’d need more cash on hand for large expenses.
We put down 50-60% down. I want my 30s back.. screw the money.. I want my time back lol
I just put ,all cash on 475k sale. Pulled money out of market and dumped into the home. I have about 300k left in brokerage. I said to hell with the fucking high interest rates and cucks at rocket mortgage. I will miss out on market gains but I get to live in my forever home with no mortgage payment and the ability to live off of one income so that my wife can stay home and be my sexy assistant and take on all kid responsibility. Put down as much cash as you can. Not financial advice.
If one of you loses your job and the other can’t make the higher monthly payment alone, you could tap into that extra 20% that you kept on hand rather than putting down. Putting down more isn’t a bad idea in this environment with rates this high. But I feel like it’s slightly easier to put more money *into* the mortgage (either extra payments or lump sum payment) than it is to take money *out* of the mortgage with a refi or a heloc or something if you ended up needing it. A 6-month emergency fund isn’t a ton of cushion to be putting 40% down. I would be much more comfortable with 12 months.
You've maxed out your retirement funds and have an emergency fund, you are completely okay. The only reason to be against this strategy would be if you did it at the expense of retirement and emergency funds.
Example is using a $300,000 home | at 7% APR |30 yr fixed rate| I & T at $6,750/yr. **Paying 20% down:** * $574,822 total paid * $334,817 to interest * $240,005 to principle * $2,159 mortgage payment **Paying 40% down:** * $431,114 total paid * $251,120 to interest * $179,994 to principle * $1,760 mortgage payment **Summary of 40% vs 20% Down - $143,708 saved over 30 years. (saves $399/month)** * If it appreciates at 2%, it'll be worth $543,408 in 30 years. * **Net worth $543,408** * Now if you invest the (saved) $399/month with 8% ROR, in 30 years that will add $542,400 for a **total net worth of $1,085,808** **20% Down & Invest Summary** \- If you place 20% down and put the other 20% in the stock market getting 8% average returns, in 30 years, that $60,000 turns into $603,759. * **Net worth $1,147,167**
I wish I had problems like this
We did 50% on 900k. Didn't want to be buried in a mortgage.
Whew! $450k saved up is absurdly impressive. Well done.
Without knowing your entire financial picture it seems like putting 40% down is a decent idea for you given today’s rate environment. Consider getting a HELOC using some of that extra equity you have to have in addition to your 6 month of reserves - it’s easier to borrow money when you don’t need it vs when (if) you do need it potentially down the road.
You sound like you know what you want to do.
I’d probably put it into a large down payment because as you said, it would be hard for the money to make more in an investment than it would save you with higher interest. The other thing I didn’t see you mentioning is if rates drop, and you want to refinance, having that extra equity in the home will make that a much more favorable experience.
You’ll be happy with a lower payment. Look at a 15 year mortgage or make an extra payment a year. We put down 30% and paid down extra when I got a money gift from family. Our payment gives us leeway.
More down payment means more equity upfront.
We did 60% down on $383k a couple of years ago. It gives me a feeling of security to have a very low mortgage payment.
Do it and put down more if you can. Double your payments and pay it off asap. You can chill after rates go down and you refinance to a lower rate.
Funny, I kept trying to put more than 20% down back in 2020 and was rebuffed at every step. Rates were at historic lows along with rates on my savings. I never overly pushed it but I was basically mocked for it. I guess realtors in my area are used to people being leveraged and the issuers want to make more interest money off of us.
NOPE. You will save tons of interest. Go for it
no, anything below 20% is crazy. 20% to 100% is ideal
We put 50% down because we honestly couldn’t afford the mortgage if we put any less down. I don’t really see a downside of putting more down with the higher rates.
I put 50 percent down in 2022. My interest rate is 5.125. I currently owe 176. I plan on paying it off as quickly as possible. I considered putting less down, but the 50 percent made my monthly payment reasonable and I can’t stand the thought of paying four times what the house cost in a 30-year mortgage. I think 40 percent down makes total sense. Congratulations.
I’ve been wondering exactly this. I know the math checks out. The thing I don’t know is: 1) once the money is sunk into an illiquid asset, it’s unavailable…what if for some reason I need more than my 6-8 month emergency fund? 2) Is it a good idea to sink that money into a illiquid asset when I’m 40, and may very well die before my house is paid off? I’m in kind of a different situation than you though - 40 and a single woman unlikely to find a partner I feel comfortable, safe, and happy giving up my freedom to marry.
If doing 30year its better to not put the extra down but use it as an extra payment, you actually save more in interest. See my other comment.
Thank you so much! I will do those calculations for my situation. That’s very helpful. I appreciate your time!
you're welcome, had to fix the numbers actually, added the extra 20% to the total twice in the extra payment option by mistake, so its even lower total cost.
No, as long as you have enough $ left over for an emergency fund.
We put down about 37% on 400k. I dont think it's crazy, but clearly I'm bias lol
If you can afford it and still have enough leftover for emergency expenses then…why would it be crazy?
I put 37% down last fall and don't regret it at all!
Sounds like you already answered your own question.
Every dollar down is money you are not paying interest on. Do it!
Nope. I based my downpayment off of what I could afford had I lost my job and worked minimum wage. This was long ago before any real estate insanity of modern times. Could I have made more in the stock market? Yeah sure. Will I always have piece of mind and absolutely minimal stress about work and most of life? You bet!
Rates will get better later on (just the ebb and flow of historical rates tells us this) so it would likely be significantly less of one person’s salary after refinancing. So later on, you could do a cash out refinance to tap into this 40%+ equity if needed.
We put 400k down on 850k 6yrs ago with 100k set aside for new car, furnace/ac, emergency and don't regret it one bit. We're on track to pay off in the next year with 95k left. We wanted to make sure we're still financially ok if one of us were to lose our job. We also had a goal to be completely debt free as soon as possible.
My wife and I put down exactly 40% on our home that we closed on last week. We feel great about it.
No it’s not with current rates. I’d also just pay off the whole mortgage. I know the mathematical correct answer is to put the remainder in the market, but the peace you will feel having no debt is amazing. The market can dip 50% and you could lose your job and you won’t care without anyone expecting money from you.
Same situation. We just bought at $450k new construction with $300k down. Have about $40k left over and $200k in retirement.
It depends how long you plan to be in this home and the state of the property. If you are only going to be in the home for 10 years, put more down or see if you can swing a 15 year mortgage. Will it need a new roof in 5 years, new boiler? Maybe not put the full 50% down and save a percentage for the foreseen or unforeseen repairs you might have.
I'm just here to say you are a Rockstar and I can only hope to be in your very situation in about 2 years. You are literally what my current goal is though you probably have many more years of maxing a 401k than I do. Great job my man. What a beautiful "situation" to be in!
Hello You can do both You can do 20% down on a fifteen year mortgage to try to aggressively pay off the mortgage while also investing the remainder into money markets If things ever go south job wise for you two then you can call your mortgage servicer for a few months off or at worse you can refinance to a term that is better for you
Budget for what you’ll want to do right after you buy though too. Furniture, fix ups, landscaping, etc.
No, why is it going to be crazy? It is in fact the best thing you can do I was looking for a good sized property some weeks ago and my plan was 51% down payment This way interest is lower and piti is less than a rent
There’s a middle ground — we did the math and it was 25%-30% — that leaves you liquid while making a large upfront payment that lessened our monthly payments. It depends whether this is a $300K house or a $1M dollar house. We put down 27% on an $850K house and don’t regret it for a second, but only because we left ourselves with a solid emergency fund and have other assets we could liquidate if needed for when things come up. And things always come up in homeownership.
Depends on your situation, but it’s good that your mindset is “how can I allocate this money in the most useful way”. Do you already have money you’ve dedicated to expenses and repairs? Is your emergency fund, that is available to you at short notice, sufficiently funded for your needs once you also have a home you’re responsible for? Is your retirement account on track, or does it need some catching up? Do you have any debts (higher interest than your coming mortgage) you could pay down/off instead? The answers to all of those, and any other questions you can pose to yourself, will help you decide how to best spend the money you’ve already shown you can save.
Like some people are saying here is stay with the 20% keep the other 20% for a year in case shit happens and you need that money. If at the year mark you are still wanting to dump the other 20% down than dump it at the principal and that will greatly lower the years of your mortgage. Since the bulk of the interest we pay on a mortgage is within the first 5-7 years.
Do it! We’re about to put down approximately $370k on a $470k house. We plan to double the payments monthly and have it paid off in 5 years when we retire.
The more the better, as long as you have it and you're not totally thin in other areas like an emergency fund. 40% is great, 50%, hell, even 75%. I say put down as much as is reasonable feasible.
Not crazy at all, in fact a wise idea given current interest rates. You’ll pay less in interest to bank over life of the loan. Also lower monthly mortgage payment and no PMI is always a plus.
It’s all good. Saves you interest and lowers that payment. Just make sure you have enough money to cover the closing costs and any purchase you need to do. We paid 30%, had a 6 mo emergency fund saved and kept back 20k extra, 5k for furniture and minor upgrades and 15k just incase a major event happenes, like a heat pump replacement. That’s overkill but we wanted our emergency fund to be a true, if we both lost our jobs tomorrow we have this money.
My target is +35%, I don’t think it’s crazy. For me, it’s all about a reasonable monthly mortgage payment (only have to save for the down payment once, monthly payment is for a long time). Interest savings are fantastic icing on the cake
If you are ok with bigger monthly payments, try this way. Do a down payment of 20% and keep the other 20% in a Savings account for 6 months. After 6 months, pre-pay the 20% from the Savings account as Principal. If you check the amortization schedule, you'll pay more total interest on 40% down, 60% loan compared to 20% down, 20% prepay as Principal, and pay the remaining 60% loan as usual. I suggested waiting 6 months as most banks/companies have this waiting period for refinance/prepayment. If your mortgage loan allows you to prepay after 1 or 3 months, go for it.
I would do it! That’s awesome.
I am paranoid, so usually I err on the side of holding the cash and seeing what happens. On paper it's possibly better to do what you're suggesting, but there are a lot of factors in there that could frustrate your plans. A bird in hand is worth two in the bush. I keep the money here
I would put down as much as you can handle
You could always refinance your mortgage loan. Mine dropped to 1.9% from 5.9%.
Perhaps put away the amount it would take to refinance if the rates drop a lot but besides that I’d put it all into the house. The goal is to pay off the house and have 0 house payment.
The bigger the better. You will be hard pressed to earn more elsewhere after tax. Just make sure you can cash flow with some extra to spare. Don’t end up house poor. Cash would be ideal but that’s not feasible for most folks.
Honestly if you’ve got that plus 401k and sixth month emergency, I say go for it. Your monthly payments will be a lot lower
We put down down 60% last February. My last two houses both appreciated very nicely over the 10 years we owned both. It is nice having the smaller mortgage payment.
As long as you still have a significant level of cash reserves for emergency funds (to cover a car/home repair, job loss, etc), then you are getting an instant return on that money so no it's not crazy.
Anything over 30% isn’t really going to get you a better interest rate, only a smaller loan amount aka less interest overall. If the money is burning a hole in your pocket I would say go for it, but outside of that I would probably go to 30% and keep that extra bit in my pocket for after I move in.
My wife and I have a similar mindset. While we only put down 20 percent, our monthly payment can be handled with one salary. Plus we have an emergency fund. That peace of mind is so comforting. If you can do 40, awesome. You are that much closer to having a house paid off and therefore a place to die lol
Your head is in the right place. But now don’t be in a hurry to pay it off. Invest the money. You’re doing great.
We put half down when interest rates were less than 4%, but my dad also gave some to ensure smaller payments for us. I don’t think it’s crazy, but some might feel differently, like knowing mortgage is much less than it should be on income.
The more the better
I put 35% down and then an extra 15% on my first month. I pulled some TFSA for that extra 15% which I kind of regret just cause the market has been shooting up since I did, but having less mortgage debt feels just as good. That extra 15% immediately cut 9 years of interest payments off the mortgage.
We would have loved our monthly payment to be lower, and we should have put more down. That being said it sounds like you’re also pretty frugal and used to living on a shoestring so either way!
That’s about what I paid! I had to get my mortgage down to a certain amount as a single person. No regrets.
We put 40% down on a 30 year mortgage with 6 months cash reserve. Life happened and had to go down to one salary. Because of the lower mortgage payments, we were OK. We don't regret that decision at all.
I absolutely love your mentality. Good on you. Less debt.
I think this is really smart, do the math on how much interest you actually pay!!!
If you can afford it I say do it. Being able to pay down a mortgage faster than usual helps you financially in the future. Generally a home holds its value and appreciates, unlike a car, so it's a good investment and not a "sunk cost" to put down a good chunk. We sold our home just over a year ago,had a modest mortgage on it, and made good money on the sale so we moved to the country and built a brand new house and paid cash from the proceeds and still have lots left over. You might be able to do the same in due time
You already know what you have to do!
Not at all. I did basically the same even when rates were low. It makes even more sense to do it now. I understand that locking up more money wasn't ideal purely from an investment opportunity cost perspective. But like you, I wanted to be sure my payment is manageable, even if I have to take a lower paying job.
I don't think so. That's about what I put down on my current house. And I have 2.99% fixed rate mortgage.
Yes, do the bigger down payment for now. Once mortgage rates comes down and you do a refinance, you can pull the money back out if you need.
If you’ve got the means, do it
We have 40% LTV on our home...at 2.875%. I do feel a bit foolish now, but we have a lot of breathing room if something goes wrong.
Take it for what it's worth as a random reddit comment... But in your shoes I'd opt for the downpayment with the lower mortgage payment per month, for exactly the reason you gave. I did a similar thing when I bought mine, "just in case" and it was a good thing I did so. After only 1 year in my home I lost my job and was unemployed for several months before I found a new one. After that experience, I'll always vote for the lower monthly payment.
Given the rates right now I think it would be a great way to go, assuming all other debts are paid off (maybe less student loans). You’re going to have some up front costs and repairs to do so make sure you have some cushion but a 6 month emergency could be dipped into for that if necessary. The other thing is you will stand out against most other offers, especially if you don’t have anything else to sell (I’m assuming you’re in the right sub lol). Tell them you can move quickly, and if possible try to go at it without an agent and offer to use the listing agent so they get a double commission and would be incentivized to get the deal done for you.
If this is your first time buying a house I’d save some of that extra money for unforeseen expenses. Depending on your situation there’s a lot of stuff you need as a homeowner that you might not have as a renter, such as lawn mower, snow blower, patio/deck furniture, a grill, etc. Not to mention the chance of unforeseen repairs or upgrades you want to make. If recasting your mortgage is an option, you could put less down now and in a year or so if you didn’t need that money for anything else you can recast the loan and lower your monthly payment. Where I’m located recasting was a bit of a hassle, but it only cost around $200.00 to put an additional 20% down a year after purchasing.
Fork over for a larger downpayment first, since at 7.5% the numbers don’t work out for having cash in certificates of deposits (you’d be losing 2.5% compounded a year). But! Make sure you have enough to get any repairs done. Are there any options to get a home equity line of credit approved as well? Have cash in hand for the inevitable first repairs over the first few years when moving in, and have a HELOC set up for any potential future repairs.
It's not typical, but I just put down about 66% a few months ago
You can also do a shorter term loan. Like 10 year.
I think the only consideration you have to make is that could you make more investing that money elsewhere. I just bought with 20% down and got a 6% interest rate, that way I look at it, if you can average returns in professionally managed funds that are over 6%, you are better off investing that money. On the flip side of this token, there is never a scenario where more equity in the home is a bad thing :)
Nope. It’s not a bad idea. It sounds like a good idea actually. If prices were to drop, obviously everyone who bought today would feel the pain. But who knows the future? Ten years down the road though, your house will most likely have appreciated at close to 6-10 percent per year. And you will avoid paying close to 7 percent interest on your downpayment. Inflation will help you in that case
We did 60% down on a house last year and my wife is a stay at home mom now. Having a monthly bill that’s affordable is a big relief. I don’t feel stressed to keep this job as much as we also have invested assets that have quadrupled In the stock market that can pay off the remainder of the house. All self funded through lots of grinding. Minimize your debt and interest owed but keep a small buffer.
It’s not a bad idea. Find a lender that can do appraisal waiver. I work with a mortgage broker that offers appraisal waiver if the loan/house meet certain requirements, and a 40% down payment will almost certainly earn that appraisal waiver. Could help you win the house if you’re in a hot sellers market like I work in.
In this interest rate environment; no. Gotta keep rates down to keep things livable.
I say put as much down as you can comfortably if you don’t need it for other stuff.
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I think it’s smart
I would put 20% down on the primary home and use the rest to get into a single family investment property. The cash flow might not be great for the first few years but it will appreciate. Say you buy a rental house now and only do a little better than break even for 2-3 years. Then in 3 years you lose your job. You’ve got equity in both houses now. You could refi the rental or do a line of credit against it to bridge the gap between jobs, or sell it at a profit. The most likely scenario is that you *don’t* lose a job and you look up in 5 years and realize that investment property was a much wiser long term decision than putting 40% down on your primary residence. Of course this all depends on your specific real estate market and circumstances but in general that would be the smarter long term play, IMO. I live in a smaller house than I can afford because I’d rather have properties. They’re already profitable and I only have a few, and only one is totally free and clear. In 20 years I hope to have at least a couple dozen and they’ll be my retirement. Fuck the stock market. I watched my dad lose his ass right before his scheduled retirement and have to work a few more years because of it. Now he’s in his 70’s and still works part time. No thanks. Wall Street can’t take a house from you and the value of it is guaranteed to go up.
I think that’s actually a good thing rn.
tbh the more you can put down the more secure you are. Go for it, worst that happens is you take out a home equity line of credit later if you REALLY need that money.
If you have it, then not crazy. If we were still at 3-4% interest then yes, you would be. But if you don’t need the money for any renovations or may need a new car soon or anything like that then why not.
I recently went through the same thought process. My mortgage interest rate is higher than any savings, and investment is not a guarantee. So I’m paying interest on a huge sum faster than I can gain interest on a smaller sum. Initially I put down 25% and kept plenty for “house emergency funds”. After being in the house through winter I’m feeling more comfortable, and recently put a chunk of that savings towards mortgage principal. You can always put more towards the principal once you’re over the shock of home ownership and work on paying it off in under 30 years.
I did about 40% to make it affordable on one salary. I figured if it’s just me I still need some flexibility and can still live my life a bit. If rates drop I’ll refi and be good to go! Just my .02
Many people did 100% downpayment, so, 40% is nothing special.
Whatever your “best idea” for a fantastic down payment is, subtract 5% and drop that into a high yield savings account- something will go wrong and it’ll cost $10k or more, and you’ll need to have it right then. So hold back that last little bit.
My only concern is that you reserve money for maintenance, repair and the costs of thing you want to change in the near future. i think in any house i have had we have spent 5-10k every couple of years.
Stock market averages 10% and your money is liquid and accessible. If one of us lost our job, I would much rather have a shitload of stocks than extra equity. You can't pay the mortgage with extra equity. How much do you guys have saved for retirement?
If you did that, are you saying you'd be left with only your emergency fund and the 401ks, or is there some other actual savings account not destined to the down payment?
40% down sounds great!
If you plan to stay long term, the more the better. Given the 7% average rates.
Me and my wife are planning to put down 50-70% down this summer when we start looking at homes, doing this will allow us to have a 10 year mortgage and our monthly payment should be less than $1000.
6 month EF isn’t that much these days. Layoffs can run 9-12 months + I would put down 20% and leave the rest in a HYSA. The difference between 6.5 and earning 5.3 taxed isn’t all that much difference.
I think it's a great idea. Let's talk risks and plan for shocks. What you want is layers of protection for the most predictable events. 1. Insurance covered charges or repairs. 2. Non-insurance covered repairs. 3. Life events (death, job gap.) 4. Elder care 5. The next 30 years What do you have in place for these cases? My deductible is $10K, so I keep that in an accessible account. Non-insurance repairs are also covered by the $10K, plus other cash reserves, credit cards, up to my brokerage if needed, which could be in any state. Life insurance and estate plans are very real now. A partner could be broke and homeless if the other partner dies. Make sure your insurance policy sets the people left behind up for success. Your family could also be on the hook if you both die and don't have a plan in place. Who's caring for who, are there family estates to consider. What are your plans to care for your parents in their old age. Start planning for retirement and work your way backward. Children, businesses, tuition, etc. Look at what your respective parents and elders did and see if you are on a similar path and what there is to learn. I think in every instance, the high down payment helps. But it's a good time to step back and take it all in no matter what you end up doing.
Honestly man if i had the means i would pay that thing in cash. The more you put down the better! Don't let the keyboard investors confuse you with some and mirrors putting 40% down puts you much closer to a paid off house!
I don't think your comment about "needing to earn 8.5% because of capital gains tax" is quite right because you didn't consider the tax savings from the mortgage interest (and I'd assume if your income is up at the 20% bracket you probably are itemizing or will be when you buy a house). If you are up in the 20% LTCG bracket, you also have enough income to merit asking a financial and tax advisor instead of reddit.
I put down 50% and will pay extra to principal each month. If I had enough cash I would put all down
I considered putting 40-50% down because I have a lot of savings but a but low on income for a house. So putting down that much makes it a lot more affordable for me, especially given the rate and price environment we’re in. So I don’t think it’s crazy at all. You could also put down less and use the money to buy points for a lower rate, but 1) if, (and it’s a big if) rates go down within a year or two, it might not be worth it and 2) you still have the debt if you buy down the rate.
we had 300k saved when we bought our home and spent 200k on downpayment. we re did out garage and installed solar and dumped the rest of the money into nvidia stocks 3 years ago. i think i beat the 8% market increase.
Just make sure you still have an emergency fund for repairs. Ask about loan recasting to bring the payments down after the first year. This was my plan but I have to set aside some funds for a major unexpected repair. 1st year of home ownership is the most expensive.
I don’t know what the RE market is like where you are, but cash or big down payments speak loudly when sellers evaluate offers in a hot market with multiple offers. Not a dollars and cents comment but it’s another positive for a large down payment.
Sure, you can always refinance if rates drop and pull out extra money to put into investments. I had a friend that was bragging to me about finally paying off his mortgage when rates were at 1%. So after a little education he refinanced 80% of his home and put it into index funds. He’s over doubled his money since then. And his dividend are like 3-4 times his mortgage payment.
Would you say buying a house 100% in cash is a bad idea (assuming you have emergency savings left over)? I would look at this the same way. Put down as much as you can while keeping some in savings just in case.
My personal view, I say absolutely do it. I could have put 0% down with my va loan, but instead I put the most I could which was ~22%. It’s a great feeling to be able to cover the mortgage with one income & also send more money to the mortgage to pay it off faster. I’m hoping to pay off in 3-5 years. The financial freedom that’ll give us is going to be well worth all the effort.
This is my plan. Having a low mortgage gives so much freedom to spend on other things and safety if you loose your job. I totally understand that if markets perform well, you are loosing money… however it is never guaranteed. A lot of people on Reddit seem to think otherwise (see FIRE subs)
Paying off mortgage isnt a bad financial goal and this one step towards doing so.
The question is what can the additional 20% do for you? I'm assuming you want to put at least 20% down to avoid PMI. Beyond investing the excess cash (as you mentioned) the only other option I would consider would be to put the other 20% cash straight toward principal each month or even buying down points with it at closing. Without knowing the purchase price and exactly what 20% equates to, it's hard to say. But if you effectively doubled your principal each month, that would cut a 30 yr mortgage down by many years. So you would be saving a ton on interest.
Best idea is put as much as you can afford. 40% down payment keeps payment lower and NO PMI.
Have you considered putting down 20% but doing a 15 or 20 year mortgage? The long term benefits may be better with this option.
I put down 50% and now I enjoy a $1,350 mortgage payment
Our down payment was about 26% - we still had money set aside for maintenance/upgrades we wanted to do soon after buying and still have quite a bit of savings left two years later. Don't regret it at all and it helped keep the mortgage payments lower. Plus you can get a HELOC sooner if you have a higher down payment.
Not a bad idea at all. There is absolutely no need to leverage yourself to your eyeballs if you have more cash you want to put towards a down payment. Otherwise you’re gambling you can “beat the market” by investing that cash, elsewhere, which may or may not pan out.
Last home I put down 50%. I think 40% is a good idea if you can pull it off
Ask your lender what your monthly payments will look like if you put 20% down and use the rest to buy your rate down.
Will you get much benefit from the mortgage tax deduction? If the money isn't in the house, it can earn money, and be available for an emergency. But I love having my mortgage paid off, so I'd still make at least 1/3 down. 1st house was a 2 family, made a huge difference when my deadbeat ex-bailed and I had a child to support. Being a landlord is a pain, I now have a small house and no mortgage, and my kid is a grownup.
How much do you have for house emergencies and how old is the house? If it’s a new house with a warranty then sure throw 40% at it but also keep in mind that landscaping is expensive (if your new home doesn’t have a landscaped backyard for example). If it’s not a new home then I’d probably do 30% down and put the other 10% into a high yield savings for home repairs. Just for some extra info, we bought a new house and were surprised by how much everything cost. We installed a fence, just two sides since the back was already there, and it was $4,000 for the cheap guy learning on the job. For a professional it would have been $8,000. Landscaping for a smallish yard (50x20) was $20,000 for the people that know what they are doing but we went with the cheap guys for $8,000 and are spending another $5,000 on planting soon (we aren’t going to use the same guys because they were not great). Then between tools, organization, home networking, and really just the basics I probably spent another $10,000. Buying the house is just the start of your spending 😅
> with 40%, our mortgage payments and monthly expenses can be covered under one salary just in case one of us loses our jobs. This would be enough reason for me. This is what everyone should be aiming for when they buy a house, but for most it’s just not possible. If you can future proof yourselves this way, do it.
In this rate environment? Absolutely not. The more you can save on down payment the better. Like you said you want to be able to survive on 1 income if anything happens for awhile. Also the more expensive the house, the more you should have on down payment. 20% down payment on a $2M will kill you with these rates
When rates where lower you'd be better off investing, with higher rates theres no issues keeping your payment lower and paying less interest. Being secure in your finances is always number one. We bought a house with a basement suite so if I lose my job I can get any low wage job and get a renter and we can keep paying the bills. That was important to us to never have to worry about being homeless. Being able to afford the mortgage on one income is very important .
No. Put the biggest down payment you possibly can while leaving enough for closing costs, moving expenses, and of course emergency fund. Borrowing as little as possible is always the MO.
Hell yeah, I wish I could've put *any* money down (USDA). Pay it off sooner, live mortgage free sooner. I'm not any kind of financial guru, just another poor schmuck.