Home Buying in San Antonio>Question Details

Edna Garza, Home Buyer in San Antonio, TX

does putting down a large downpayment on a home significantly reduce the monthly payment?

Asked by Edna Garza, San Antonio, TX Sun Jan 23, 2011

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18
It will reduce your monthly payment but more significant is the amount of interest you will pay over the life of the loan, as well as, give you a positive loan to value (LTV) resulting in no mortgage insurance (PMI/MI). Your savings will be huge over over a 15 or 30 year period.

In today's market, home buyers and sellers are having trouble with houses appraising out to the purchase price, resulting in transactions falling apart. With a higher down payment, one can literally push the appraisal over the top and breeze through it.

However, in an economically unstable time, sometimes it is more prudent to remain liquid and opt for a smaller down payment retaining your cash money for a rainy day.

Talk with a qualified lender and discuss the many different options as well as your needs and concerns. Best of luck.
2 votes Thank Flag Link Sun Jan 23, 2011
Of course it does, but what is your definition of "significantly reduce"? Dont ask Real Estate Agents, go speak with a local lender. If you dont know one, start with your local bank. They can show you what you are pre-approved for and provide you a mortgage calculator, which will allow you to see what the different is in the loan.

I work a lot with first time home buyers and $20K sounds like a lot of money, and it is. However, the difference $20K makes on a 30 year loan at 5% interest is not very much. SOME clients & investors will shoot for 20% down. Some because they can only get a loan with 20% but others will put that much down because it does lower the rate BUT more importantly, it gets you out of PMI or mortgage owners insurance, which in turn, reduces your monthtly payment.
Go see a local lender, it is free to do and you will learn a lot.
Good luck.
Spirit Messingham

Tierra Antigua Realty
Tucson, AZ
1 vote Thank Flag Link Sun Jan 23, 2011
Significant... not unless the down payment is also significant.

Example.. If you throw down an extra $1000, it may only reduce your payment between $6 and $10 per month. Usually the rule of thumb on this one is to simply think in terms of.. "For every $1000 I put down, it will make my payment about $6 to $10 less per month" Obviously a lot of things are involved in getting a better figure.. What is your interest rate? How big is the loan? Will there be Mortgage Insurance or PMI? Etc. If you put more down will you eliminate the PMI or the MI?

Here's another way to think about it.. if you have extra money to put down... find out how much more you would need to put down to keep the payment to where you would like it to be, and reduce the term of the note... Example: Your payment on a 30 year note $1000 per month with 3.5% down... Maybe ask "How much more would I have to put down to keep my payment at $1000 per month and have my note only be 15 years" Most folks don't think about that... but you just cut your mortgage length in half and saved yourself roughly the sales price of the home in interest you will never pay..... That is a SMART way to use extra down payment. Maybe find out how much more down to get a 10 year note... Have that sucker paid off in full... Imagine life with NO MORTGAGE PAYMENT!! Wouldn't that be nice!! You will build equity so much faster, and your extra down payment actually went to work for you!

Depending on what your goals are... sometimes it may be better to keep the extra cash in your bank account and use that money to pay off other debts that have higher interest rates... If you have no other debts.. it's not a bad place to put money.. It's like putting it into a savings account you cant touch... but when you sell the home.. you will get it back and then some (hopefully.)

But... if you are like me.. I just hate montly payments of any kind... So I would focus all of my extra money into paying off the note as fast as possible.. So, I might put less money down... and then start smashing principal balance and keep the higher payment to pay it off faster... But, then I hate debt so much.. that I am crazy like that.


Just and Idea :)

Jason Campbell
Realtor / Mortgage Loan Officer
Keller Williams Realty
210-389-5266
0 votes Thank Flag Link Mon Jan 24, 2011
Edna,

It's certainly called leverage. OPM is a great thing if used appropriately. Depends on what other plans you may have for the rest of your liquid reserves, but i certainly would never recommend putting more than 20% on your primary residence unless you have a very particular circumstance.

God bless,
Josh
Web Reference: http://www.exposedhomes.com
0 votes Thank Flag Link Mon Jan 24, 2011
It will reduce your montly payment simply because you are borrowing less money. In addition to the down payment reducing your payment, a high FICA score wil help you get a lower interest rate and the length of the loan will determine the payment amount. One' thing to remember taxes and home owner's insurance will be added to your payment.
0 votes Thank Flag Link Mon Jan 24, 2011
It certainly can - but also depends on what type of loan it is and the length of the loan. Putting 20% down or more also eliminates PMI (mortgage insurance).

A good lender can give you specific numbers based on your unique personal situation - and it costs you nothing for the information.

Contact Cyrena Durkee @ WR Starkey Mortgage and she'll answer all your mortgage questions. Email - cdurkee@wrstarkey.com, cell - 210-685-5618 and website - http://www.LoansByCyrena.com (you can even apply online).

P.J. Humes
REALTOR ~ Smallwood & Associates
Keller Williams Legacy
210.845.9751 Cell
pjhumes@kw.com
0 votes Thank Flag Link Sun Jan 23, 2011
It definitely can. I would recommend you use a mortgage calculator to get an idea of different options and down payment amounts. Keep in mind if you are looking at conventional financing putting 20% down will allow you to have one lien and and avoid a second lien or mortgage insurance.

Putting down more than 20% can have diminishing returns while interest rates are so low. You may be better served putting your money to work for you in safe investments or as a nest egg for future needs. That is more of a personal decision you may want to give some thought to.
0 votes Thank Flag Link Sun Jan 23, 2011
Yes....the more you put down the less the payment.
On mortgage alone...each $1000 extra you put down saves about $6/month at 6% interest on a 30year loan.

Search mortgage calculator on google and you can play around with different senarios to find the best for you.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Sun Jan 23, 2011
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
Contact
The most accurate answer came from Corey Sprague. There are several factors involved; I'm a real estate broker but also had a mortgage license for several years. I can recommend some excellent mortgage bankers in San Antonio, who will give you better rates and better service than your bank. Don't hesitate to contact me.

Sylvie Shurgot
sshurgot@gmail.com
(210) 380-8681
0 votes Thank Flag Link Sun Jan 23, 2011
Edna,

Good Sunday! Excellent question. If you are putting down 50k then your payment will be reduced by $350/month. You might be better served investing this money in another investment, unless you simply want to be guaranteed a lower payment over time. Also, the more you put down could also reduce your interest rate, but confer with your lender to make sure. In either case you should sit down with a lender and or an accountant and see which is the best use of your funds.

Let me know if you have any questions, as you are my ideal client, one who is savvy and knows what you are looking for in a home. I pay my buyer clients for that ability.

Keep in mind that we are a non-traditional type of real estate company with the best buyer rebate program in town.

P.S. I love referrals! If you ever have a friend of family member, who is tech savvy looking to find a home in the 225k-800k range, and would appreciate a New Way of Buying a Home in Texas, please refer them to http://www.Buy75.com

BuyersHouseRealty is the virtual evolution of real estate, and we firmly believe in educating buyers! So much that we pay our buyers for their education! Learn more>> http://www.buy75.com/learn-and-earn/why-choose-buy75

Happy House Hunting,

Gavin St.Louis
Managing Broker/Owner
BuyersHouseRealty
877.77.BUY75
"The Real Estate Deal"
Web Reference: http://www.Buy75.com
0 votes Thank Flag Link Sun Jan 23, 2011
The more you put down can reduce your monthly payment because you are borrowing less. However, it is important to know all the cost and what other factors that affect your monthly payment and the cost of purchasing a house in general. Other things to consider will be taxes, interest rate, closing cost, insurance, etc.

Definitely speak to a lender but one that will give you the important information you need to make a wise purchasing decision. Ask the lender to provide you with purchasing worksheets that will give you a breakdown of everything. For example, if you want to purchase a house at $200,000k with an 80% loan, 20% down with an interest rate of 4.5%, the worksheet will give you a break down of the following including: closing cost, taxes, insurance, and most importantly, monthly payment.

Several of these scenarios can provide you with good information to help you make a wise purchasing choice. Don't be afraid to ask questions because the industry has changed so much you need to know the facts.

Good luck.
0 votes Thank Flag Link Sun Jan 23, 2011
NO, putting down a large down payment on a home does NOT significantly reduce the monthly payment. This is because it only reduces your principle and interest and does nothing to the taxes and insurance portion of your payment. What does significantly reduce the amount of money you bring to the table is hiring an agent from Half Priced Real Estate http://www.halfpriced.com They will rebate half of any buyers agent commission directly towards you pre-paids and closing costs!


David Marne, Broker
Half Priced Real Estate
(210) 281-1604
Web Reference: http://www.halfpriced.com
0 votes Thank Flag Link Sun Jan 23, 2011
Hello Edna,

At today's low interest rates, for every $1000 you put down on a home your payment is reduced by approximately $5/month on a 30 year fixed rate mortgage. However, once your down payment amount is at least 20% of the total sales price, then your payment could be reduced even furthur by the amount of any mortgage insurance premium which is required with many loans. If you are buying with a VA loan or certain USDA loans, then mortgage insurance is not required.

Please let me know if you have any further questions, or would like assistance with your home purchase! I would be glad to help and I am an Accredited Buyer Representative!

Amanda P. Herring
Realtor-Broker, ABR

(210) 771-8608
0 votes Thank Flag Link Sun Jan 23, 2011
With a fixed rate of 6%, every $1000.00 put down will reduce your payment by $6.00 per month.
0 votes Thank Flag Link Sun Jan 23, 2011
Edna, every $10,000 that you give down on a loan at 5% your payment will change about $70.00 a month. Please let me know if you have any other questions.
0 votes Thank Flag Link Sun Jan 23, 2011
I would talk to a lender and ask for a payment schedule to see what is your best option and if it is worth putting more money down.

Where you save would be that you are borrowing less thus paying less on interest over the life of the loan.
0 votes Thank Flag Link Sun Jan 23, 2011
I guess that depends on your definition of significant.

Apply. Have the lender show you your pmt with and without the large down pmt.

Tom Burris
Mortgage Banker
DallasLoanGuy.com
214-763-4629 cell/text/nights/weekends
tomburris@dallasloanguy.com
0 votes Thank Flag Link Sun Jan 23, 2011
It can confer with mortgage broker who will provide you the payment amount of the loan. It reduces the amount of money you borrowed from the bank

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Sun Jan 23, 2011
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