Putting 20% down reduces the amount you need to borrow and in most cases removes private mortgage insurance (PMI) from a conventional mortgage. That lowers both the monthly housing cost and the interest paid over the life of the loan. The actual savings depend on the home price, interest rate, loan term and the smaller down payment being compared. A 20% down payment can cut financing costs, but it should still leave enough cash for closing costs, moving expenses, repairs and other financial priorities.
Key Takeaways
- You do not need 20% down for many mortgage programs.
- A 20% down payment reduces the loan balance and generally avoids PMI on a conventional loan.
- On a $350,000 home, 20% down is $70,000 and leaves a $280,000 loan.
- FHA mortgage insurance follows different rules than conventional PMI.
- Property taxes, homeowners insurance and HOA dues do not change with a larger down payment.
What Does 20% Down Actually Do?
With a 20% down payment, the buyer finances the remaining 80% before any costs or fees that may be added to the loan. For conventional financing, 20% is an important threshold because PMI is generally not required at that level. PMI protects the lender rather than the borrower, so removing it lowers the monthly cost of the mortgage without changing anything about the coverage the buyer carries. For a closer look at how that cost works, see what PMI is and how to avoid it.
How Would a Bigger Down Payment Be Beneficial to Borrowers?
A bigger down payment reduces the starting mortgage balance. If the interest rate and loan term stay the same, borrowing less lowers the required principal-and-interest payment and reduces the total interest paid over the life of the loan. A larger down payment also gives the buyer more equity from the start.
Lower Loan Balance
Every additional dollar paid upfront is one less dollar that needs to be borrowed. That difference compounds across a 30-year term, which is why the same home can carry two very different total costs depending on the down payment. Program minimums vary widely, from no money down on some government-backed loans to 3% on some conventional programs, so the starting point is not the same for every buyer. A breakdown by loan type is available in how much a down payment on a house is.
Potentially Lower Monthly Housing Cost
On a conventional loan, reaching 20% down can also remove PMI from the initial payment. Property taxes, homeowners insurance and HOA fees are separate and do not disappear with a larger down payment. When comparing options, look at the full monthly cost of homeownership rather than the mortgage balance alone.
What 20% Down Looks Like on a $350,000 Home
Cash down and the loan balance that follows, before any costs or fees added to the loan.
$70,000
Loan amount: $280,000
| Down Payment | Cash Down | Loan Amount |
|---|---|---|
| 5% | $17,500 | $332,500 |
| 10% | $35,000 | $315,000 |
| 15% | $52,500 | $297,500 |
| 20% | $70,000 | $280,000 |
Figures exclude closing costs, prepaid taxes and insurance, moving expenses, repairs, and cash a buyer may want to hold in reserve.
How Much Could 20% Down Save on the Monthly Payment?
There is no single dollar amount because the savings depend on the rate, term and smaller down payment being compared. On the same $350,000 home, 10% down leaves a $315,000 mortgage, while 20% down leaves a $280,000 mortgage. That is $35,000 less to finance.
At the same interest rate and loan term, financing $35,000 less lowers principal and interest. A conventional buyer putting 20% down would also avoid PMI, while a buyer putting 10% down may need it. Because PMI pricing varies by credit profile, loan-to-value ratio and insurer, an actual lender quote gives a more useful comparison than a generic estimate. Buyers who are still setting a price range can also compare how much home they can afford at several down payment levels.
How the Savings Shift With Rate and Term
The gap between a 10% and a 20% down payment is not a fixed dollar amount. It moves with the interest rate and the length of the loan.
At a higher interest rate, the same $35,000 difference in loan size carries a larger monthly cost, so the payment gap between the two options widens. At a lower rate, that gap narrows. A comparison run several months ago may no longer describe what the same two options look like now.
Loan term works the same way. A 30-year term spreads the balance across more payments, which lowers the monthly amount but raises the total interest paid. A 15-year term does the opposite. A buyer weighing 20% down against a shorter term is often comparing two different routes to the same goal of paying less interest, and a lender can price both side by side.
Mortgage insurance adds a third variable. PMI is priced on the credit profile, the loan-to-value ratio and the insurer, so two buyers putting 10% down on the same home can carry different PMI costs. That is the piece a generic online calculator is least likely to get right.
What 20% Down Does Not Change
A larger down payment reduces the loan amount, but several costs stay where they are. Property taxes, homeowners insurance, HOA dues and utilities are tied to the property rather than to the loan balance. Closing costs are calculated on the purchase price and the loan, so paying more upfront does not erase them.
Credit score, debt-to-income ratio and loan program also continue to influence the interest rate a lender offers. A 20% down payment can strengthen an application, but it does not replace the rest of the underwriting picture. Two buyers putting the same amount down on the same home can receive different rates. Comparing offers means looking at the rate, the mortgage insurance, the lender charges and the cash required at closing together rather than one line at a time.
Should I Put 20% Down on a House?
Putting 20% down on a mortgage may make sense if it reduces borrowing costs without leaving the buyer short of cash. It lowers the mortgage balance, reduces principal and interest, and generally eliminates PMI on a conventional loan. A buyer may prefer a smaller down payment if using that much cash would leave too little for closing costs, repairs, moving or an emergency reserve. The full set of tradeoffs is covered in the pros and cons of putting 20 percent down.
Compare the Full Loan Cost
Ask lenders for loan estimates for the down payment levels and mortgage programs under consideration. Compare the interest rate, principal and interest, mortgage insurance, lender charges, cash to close, and other costs. A mortgage preapproval can help define the loan amount and financing options available before an offer goes in.
Keep Enough Cash After Closing
A larger down payment can reduce financing costs, but keeping cash available after closing matters just as much. Repairs, maintenance, moving expenses and unexpected costs can arise within the first months of ownership. Planning for the first year of homeownership helps determine how much of a savings balance to commit to the down payment.
Frequently Asked Questions
Do you need to put 20% down on a house?
No. Down payments vary by loan program, home price, available savings and the buyer’s circumstances. The 20% figure matters because it is the point where PMI is generally not required on a conventional mortgage, not because it is a minimum.
Can you put less than 20% down on a house?
Yes. Many buyers purchase with less than 20% down. A smaller down payment creates a larger mortgage balance and may add mortgage insurance or other loan costs, depending on the program.
Does a conventional loan require 20% down?
No. Some conforming conventional programs allow eligible borrowers to put as little as 3% down. The 20% figure is commonly associated with avoiding PMI, not with a universal minimum down payment.
Can you put 20% down on an FHA loan?
Yes. An eligible borrower can put 20% down on an FHA loan. FHA mortgage insurance follows different rules from conventional PMI, so a 20% FHA down payment does not automatically remove mortgage insurance.
Can I avoid PMI without putting 20% down?
Some loan structures and lender programs handle mortgage insurance differently, and pricing varies. A full breakdown is available in the guide to avoiding PMI.
Can PMI be removed later?
Often, yes. Conventional borrowers may be able to request cancellation once the loan reaches applicable thresholds, and automatic termination rules can also apply. FHA and VA loans follow different rules.
