Should I Put Down 10 Percent Or 20 Percent To Get A Mortgage?

Typical Advice Given to Middle Age People

This is a difficult and a very personalized question that if possible can be reviewed with a financial planner that will help them save thousands of dollars over time on their mortgage. With these savings they can sit down and discuss where to allocate those investments.

Not only are they increasing liquidity, safety, rate of return and tax deductions, but they are also planning for retirement and reaching the freedom point sooner where their assets have exceeded their liabilities.

Before applying for a mortgage you should work on eliminating a good majority of consumer debt to lower your debt-to-income ratio, improve your credit score, and increase your cash flow.

If you saved enough to put down a large down payment, let’s say 20 percent, you should first check how much you could afford in monthly payments. The reason behind this is to leverage and keep funds liquid for other purposes.

Remember there is no rate of return in equity. Therefore, the least amount you put as a down payment the higher the rate of return will be.

Usually it is good advise to tell clients never to put a big down payment if they can afford a higher loan amount. Financial planners tell them that keeping money liquid is critical in case an emergency should arise that will prevent them from working.

Also, it is a good idea to always have six months of salary in a liquid savings account or asset accumulation account to withdrawal at any time without having to refinance

Typical Advice Given To Young Couples

The amount you need for a down payment varies depending on how much money you have to contribute and the type of financing you obtain. Some lenders want you to put down 20 percent or you may qualify for 0 percent financing, requiring you to cover only closing costs and incidentals.

Five percent down is usually the minimum many lenders will accept. Don’t’ have that much? You could borrow that money from someone, but that means more money to pay back and you pay interest on that also.

If you don’t put down a minimum down payment, the lender considers it a risk to give you a loan, but they will if you will pay for your own insurance.

Typical Advice Given To Those Without Money To Put Down

Should you get a zero percent down loan just because you can? Here are the reasons to think twice about getting a 0 percent down loan:

You are more likely to lose your home because you didn’t have the financial discipline to save or are not making enough money for your home. The less you put down, the higher your monthly payments will be making the entire matter worse.

If you put nothing down that means you will have to settle with a smaller home and soon out growing it. Also, it will be more difficult to find lenders because of the risk they will be taking on.

In the end it is a personal choice and the money that you have saved. If I had it all, I would put a large amount down to have a smaller monthly payment and qualify to receive a lower interest rate. Therefore, be able to put more into personal savings monthly and reach my goals by keeping my funds liquid and plan for a richer retirement.

That’s a perfect dream for many, many of us!