Dear real estate finance pros -- is a greater downpayment always better, even on a restricted home?

Asked by Acey, 10025 Sat Jan 10, 2009

I'm buying a co-op in Manhattan sponsored by the city. It's kind of a "gentrification" program -- the city subsidizes buyers to move into buildings in rougher areas of town. You have to stay for awhile though, to prevent flipping. In my case, if you sell within 4 years, any profit you make is reclaimed by the city.

So one of the questions I'm dealing with right now are:

1) I only need to put down 10%, but I have enough to put down 20%. Obviously, I'd like to put down more to reduce my monthly expenses, but my lawyer suggested that I put down as little as I need to, since that money could be earning more elsewhere, and because of the lock-in, I won't be making any money at all on that extra 10%.

On the other hand, if my mortgage payments are small, I'm saving on interest -- and there aren't a lot of investments doing that well nowadays. So I'm thinking of going with 20%.

What do you think? Is this a reasonable strategy?

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The Braswell…, Agent, New york, NY
Sun Mar 14, 2010
If you believe that the market will be staying relatively flat, and that neither investing in real estate nor some types of stocks and bonds will provide you with a significant difference in return on your investment, than put more down now. If that extra 10% brings you to the brink of what you can afford, than consider 15%. It is important to keep a certain level of liquid assets available for the unknowns in life.

I think given the uncertainty of the market, neither is a bad choice.
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