Tim Young, Home Buyer in Cranston, RI

Should I put a large downpayment into a new home?

Asked by Tim Young, Cranston, RI Fri Jun 13, 2008

I earn about 52k a year, and have about 250k in savings and investments. I am considering a new home purchase, and am considering putting substantially more into the home then a 20% down payment. What are the things that I should consider before doing this, and are there any other options for me to consider? I have been looking at homes that are in the 250-275k range.

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6
Hello, Tim,
Without a doubt, a minimum of 20% down will avoid the PMI, and get you a better rate.
Something for you to consider...Say I have 100K. 20% down, or 50K on a 250K home will leave me with
50K in savings....I would stay there...do a 15 year mortgage (which will give me a better rate, too) ..pay an extra $$$ per month on my payment ( this will shave off interest, too) after a year, and with luck/hard work, I added another 10K to my savings...put it on my principal, which will lower my interest payment..and I would continue on that path. If I run into trouble (s/a lose my job)...my savings will be there for me and I have the flexability not to pay extra, but a low minimum mortgage payment until I am stable again.
As always seek the advice of the pros.
I am a realtor with over 20 years of experience and licensed in CT and RI.
You may call me anytime with questions, coments, or maybe a list of foreclosures ( I am conducting an Open House on one this Sunday )...feel free to stop by.
1 vote Thank Flag Link Thu May 20, 2010
You may want to get advice from a financial adviser. I don't think it is ever a good idea to put all of your eggs in one basket. If you get an interest only loan, you can always pay it down later and have your payment drop proportionally.
Web Reference: http://GetPrequalified.com
1 vote Thank Flag Link Fri Jun 13, 2008
Tim, which is more important to you, money in the bank or a lower monthly payment.

Consider the difference between the monthly payment with 20.0% down and the amount you are considering. That difference is probably neglible i.e. a few hundred dollars per month.

Also, cash is a liquid source of funds that can be used immediately while equity in real estate is money on paper accessable when you either sell the property or place a loan on it i.e. refinance, second mortgage, line of credit

Good luck in your new home search!
0 votes Thank Flag Link Fri Jun 13, 2008
This sounds like a question for your accountant. You are talking about differences in monthly payments vs tax implications. Only someone that knows your entire financial picture can help you to make an informed decision.
Other options to consider are minimum down payment and invest the rest. Ask you accountant or financial planner.
Web Reference: http://www.danrossre.com
0 votes Thank Flag Link Fri Jun 13, 2008
How much money to put down on a home depends on many factors. You'll have to consider whether you want extra cash tied up in your home - which is technically a non-liquid investment. On the other hand, a larger down payment will probably qualify you for better loan programs and/or better interest rates. But, can you make more money if you keep your savings/investments where they are versus what you will save with a lower interest rate? You should speak with both your mortgage broker and your financial planner to determine the best course of action for your particular situation.
0 votes Thank Flag Link Fri Jun 13, 2008
Hi Tom,

Interest rates on mortgages are running in the low 6% so if you are getting a better return on your investment and can easily handle the monthly payments for this home I would not shift too much over. You can usually make extra payments and reduce the time of your loan and that puts you in control of when and how much you shift over.

You never know what may lie ahead -- unforeseen home improvements, a change in your personal situation . But you the best person to talk to is a mortgage broker who has access to many financing options so you can see which works best for you I know a great one--Leslie Orlando - you can email her at leslie.orlando@nemoves.com You should also talk to your financial advisor about your plans.

Good Luck even though from you email you probably won't need it since it seems you are quite a savvy saver!
0 votes Thank Flag Link Fri Jun 13, 2008
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