Is 20% down still the right target?

Not as a condition of approval — low-down programmes exist — but as a pricing threshold it still matters, because that is where private mortgage insurance disappears. On a $400,000 purchase at 6.5%, moving from 5% to 20% down removes $158 a month of insurance and $379 a month of principal and interest.

How much does each extra 1% of down payment save?

About $25 a month for every $4,000 you add, in principal and interest, plus whatever PMI that removes while you are still below 20%. The steps are not evenly spaced once insurance is in the picture, which is why the Down Payment Calculator prices each tier on its own.

Is it better to put more down or invest the cash?

A dollar applied to the down payment earns exactly your note rate — 6.5% in this example — guaranteed and untaxed. Investing beats that only if you clear 6.5% after tax and can leave the money alone. If you might need the cash within a few years, liquidity usually outweighs the return argument.

How long do I pay PMI if I put 5% down?

On this example the PMI Calculator runs it for 124 months and about $19,600 in total, since insurance ends at 80% loan-to-value measured against the price you paid. Putting 10% down shortens it to 95 months, and appreciation can shorten it further if you request removal with an appraisal.

Does a larger down payment make my offer stronger?

Often, mostly because a smaller loan is less likely to stumble on appraisal or income limits. It is worth less than buyers assume against a competing cash offer, though, since sellers price financing risk and closing dates more highly than the size of the deposit.

The Pros and Cons of a Larger Down Payment

4 min read · updated October 8, 2026

The down payment is the part of a mortgage you bring rather than borrow, which is why it reads as a measure of seriousness. Sometimes that is true. Sometimes the same cash earns more outside the deal than inside it.

Both sides, on one purchase: a $400,000 home at 6.5% over 30 years, with private mortgage insurance at the flat 0.5% a year the PMI Calculator uses as its default. Enter those numbers and every figure below appears on the page.

What a larger down payment buys

At 20% down the loan is $320,000 and the payment is $2,023, with no mortgage insurance at all. At 5% down the loan is $380,000, the payment is $2,402 and insurance adds $158, so the month costs $2,560. That gap of $537 is bought with $60,000 of extra cash — roughly $9 a month for every thousand you leave in the deal. Across the term the same $60,000 removes about $76,500 of interest, since total interest falls from $484,669 to $408,142; you can watch that difference row by row in the amortization table. Work the tiers in the Down Payment Calculator for your own price. Smaller loans are cheaper at the table too: closing costs are quoted against the loan amount, and the income you need to qualify is set by the payment rather than by the price on the listing (Home Affordability Calculator).

The cost is the cash itself

The other side of the ledger is the money. Sixty thousand dollars inside the walls does not cover a roof, a repair bill or a layoff, and equity is slow to withdraw. The financial comparison is narrow and worth stating plainly: a dollar applied to the down payment earns exactly your mortgage rate — guaranteed and untaxed — which here is 6.5%. So the question is not whether the house pays well but whether you can clear 6.5% after tax on money you are willing to lock away. The same $60,000 at 4% returns about $200 a month and at 8% about $350, both before tax and neither of them promised. One boundary matters: that argument prices the loan, not the insurance, which is why the step from 5% to 20% down is worth far more than the step from 20% to 30%.

PMI is the steepest step on the ladder

Mortgage insurance protects the lender rather than you, and it is priced on the original loan, so it stays flat while the balance falls (PMI Calculator). On 5% down it runs 124 months — ten and a half years — and totals about $19,600 that buys nothing but the loan. At 10% down it is 95 months and about $14,250; at 15%, 56 months and about $7,900. Removal can be requested at 80% loan-to-value and happens automatically at 79%, both measured against the price you paid. A rising market can justify asking sooner, something the calculator cannot price for you.

The practical middle

Buyers torn between these choices are usually deciding how much reserve to keep rather than how much to sacrifice. Fifteen percent down costs $2,291 a month here and ends the insurance in under five years. Ten percent costs $2,425 and leaves $20,000 more of your cash free. Either way, what you keep should cover two to six months of payments — the range is set out line by line in what cash you need to buy a house.

When a bigger down payment is the wrong call

Three cases argue the other way. If you may move inside five years, resale costs can consume the interest saving before it arrives, which is the same break-even logic the Refinance Break-Even Calculator applies to a new loan. If reaching 20% means two more years of renting, that rent is a real cost the saving has to beat (Rent Versus Buy Calculator). And if the down payment empties the account, you have bought a discount on your interest rate using your emergency fund as collateral.

How to decide

Answer three questions in order: how long you will stay, how much cash stays liquid afterwards, and whether your money can earn more than the note rate after tax. A long horizon, comfortable reserves and a modest safe return elsewhere all favour paying more down. A short horizon, thin reserves or a genuinely better use of capital favour paying less. Price both positions in the Down Payment Calculator, then read the months they leave you in the Mortgage Payment Calculator before you commit to either.