The Pros and Cons of a Large Down Payment

The Pros and Cons of a Large Down Payment When Buying a Home

If you are in the market for a new home, one of the considerations you will need to make is how much to

invest in your down payment. Let's take a quick look at some of the pros and cons of making a large

down payment when buying your next home.

A Large Down Payment Has Its Benefits 

If you have the funds available, you may find a bit of an advantage in a large down payment. Here are a

few potential benefits that you may realize:

You Can Afford More 'House'- if you are aiming for a large, luxurious home a

significant down payment can help you get there. As long as your credit is in line with your needs, a large

down payment leaves more room in your mortgage.

You May Pay Less Interest - conversely, if you don't need to carry a big mortgage you

can choose a shorter amortization period for your mortgage. A shorter loan period means that you are

likely to pay less in interest.

You Might Not Need PMI- if you can afford to invest more than 20 percent of the

home's value in your down payment, you may not be required to purchase private mortgage insurance.

A Few Of The Downsides

Of course, there are some potential downsides to using a large portion of your available cash as a down

payment:

Do You Have The Money? - a large down payment doesn't make a lot of sense if your

finances can't tolerate that hit right now. If you have your down payment and little else, you might want to

reconsider.

You Will Be Less Liquid In The Short Term - keep in mind that once you sign the

closing paperwork, your down payment cash is gone. This will leave you a bit less liquid in the short term

since you would need to sell your home to get that cash back out.

You Can't Invest That Money Elsewhere - you won't be able to use these funds for

other investment purposes. Of course, real estate is an investment itself so this may be less of a

concern.

Still Have Questions? Get In Touch 

Choosing the right amount for a down payment is a decision best made with professional help. Contact

us at your convenience and our mortgage advisor team will be happy to share our experience and

insight.