Home Buying in Pembroke Park>Question Details

MORR9534, Home Buyer in Miramar, FL

Is it beneficial to me to make a downpayment greater than 20%? A realtor once told me that it didn't make much difference.

Asked by MORR9534, Miramar, FL Tue Jun 26, 2012

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Cash is king & it is better to hold on to the cash with interest rates so low. Where else can you borrow money for less than 4% & you get to write off the interest payments. Lots of options & opportunities are available when you have cash available. The only time I would recommend 20% down is to avoid having to pay Morgage insurance. On $150,000 PMI (Morgage Insurance) is around $135 extra a month. If putting down 20% can avoid you having to pay PMI, then I believe it would be well worth it!
1 vote Thank Flag Link Tue Jun 26, 2012
No, not at all.

Interest rates are being held artificially low - the idea is that low interest rates spur investment and ignite growth.

So putting extra money into a downpayment has an opportunity cost - you're putting money in to avoid borrowing it at below-market rates, when you can take that money and invest it elsewhere - or simply provide extra liquidity - for a really minimal cost.

There are some financial advisers who think that even with the cost of mortgage insurance, putting the minimum down is the way to go. And there's something to that - people who put 20% down a few years ago lost their equity; people who put the minimum down were just under water.

All the best,
1 vote Thank Flag Link Tue Jun 26, 2012
That was then, this is now.

First, most homes in this area are now sold in a multiple offer situation. Your offer will be compared to cash deals, conventional loans (with downpayments of more than 20%) and FHA loans. Cash wins a lot of the time. Conventional loans would be considered a second best option.

Of course, this is based on the average home purchase of about $200,000. If you're looking to buy something a lot more expensive, it probably doesn't matter, because the competition happens at the economical part of the market.

Also, a conventional mortgage means that you won't have to pay for mortgage insurance, and your monthly payments may be lower.
1 vote Thank Flag Link Tue Jun 26, 2012
Old question, but if you haven’t made the move yet here is a thought. Mortgage rates are lower than they have been in the last 50 years if not longer. They will not stay here forever, they WILL go up, it is only a matter of time. If you stay liquid, keep the amount you have that exceeds the 20% in a savings account, someday soon you can arbitrage the interest rate. You’ll be able to buy a CD that pays a higher rate than you are paying on the mortgage, that will feel nifty if your lender helps pay off your mortgage.

Accrued interest does the opposite of amortization and if you compare the two you will be surprised at what you discover, try it.

Also, money locked in equity is harder to get out in case of an emergency or tragedy, when you need liquidity the most is when a lender can’t help, one of life’s ironies.

Jim Simms
NMLS # 6395
JSimms@cmcloans.com
Financing Kentucky One Home at a Time
0 votes Thank Flag Link Fri Jul 13, 2012
Much will depend on the mortgage program you qualify for - but in general, the amount of cash in the deal is one term that is reviewed by the seller for strength, along with overall price, and closing timeframe.

If there is a competing offer to yours, and all things are otherwise equal, then more cash in the deal may well tilt the deal. For one thing, very little cash - or inflating the price to allow you to finance a portion of closing costs - can strain the appraisal. Underappraisals are getting in the way of some deals in my area at the moment. I''m battling one right now----

Best,
Jeanne Feenick
Unwavering Commitment to Service, Unsurpassed Results
0 votes Thank Flag Link Wed Jun 27, 2012
Dear MORR9534,

This question is more dependent on what you qualify for.

Susan Penn, PA, SFR, CDPE
EWM Realtors® | A HomeServices of America Company | An Affiliate of Berkshire Hathaway
2000 Main Street, Suite 103 | Weston, FL 33326
T: 954.306.7337 | C: 954.557.5993 | F: 954.515.0200 | penn.s@ewm.com | http://www.ewm.com
0 votes Thank Flag Link Wed Jun 27, 2012
Mack makes a great point. Which mortgage money so cheap, your end game should be to hold onto you cash. Use it to pay cash for a new car, if necessary, where the money is not so cheap.

Your agent will help you with this strategy. Before any of this is relevant, you need to get the property under contract. Again, your agent is your guide. Yes, the down payment does make a difference but not for the reasons you may think. Seriously, chat with your agent so you are clear regarding the strategy to be put into play and what is most beneficial for you in regards to your financial situation and purchase objectives.

Best of success in buying your Miramar home,
Annette Lawrence, Broker/Associate
Remax Realtec Group, Palm Harbor, FL
727.420.4042
Questions? Chat on: http://www.FloridaRealEstateMadeEASY.com
0 votes Thank Flag Link Wed Jun 27, 2012
When you make a downpayment of 20% or above you don't have to pay monthly mortgage insurance. On ahome of about 100,000 you will probable save about 100 a month from your mortgage payment. I consider that to be a significant difference.

Tony Vega
Charles Rutenberg Realty
0 votes Thank Flag Link Tue Jun 26, 2012
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