A bigger down payment can help you afford a more expensive house without increasing your mortgage loan amount. For example, if you qualify for a $320,000 mortgage, putting 5% down could support a home price of about $337,000. With 20% down, that same loan amount could support a $400,000 home.
A larger down payment can also lower your monthly mortgage payment and help you avoid private mortgage insurance (PMI) on a conventional loan. However, it means spending more money upfront, leaving less cash for closing costs, repairs and emergencies.
The right down payment depends on your budget, available savings and long-term financial goals. Understanding these trade-offs can help you decide whether putting more money down is worth it.
Key Takeaways
- A larger down payment reduces the mortgage loan amount for the same home price.
- With a $320,000 mortgage, moving from 5% to 20% down raises the supported home price from about $337,000 to $400,000.
- A conventional mortgage with at least 20% down generally avoids borrower-paid private mortgage insurance.
- When choosing a down payment, keeping savings for closing costs, repairs and emergencies may matter more than reaching 20%.
- A larger down payment may reassure a home seller, but offer price and contract terms still matter.
How Much More House Can a Bigger Down Payment Buy?
A bigger down payment can increase your buying power without increasing your mortgage loan amount. For example, with a $320,000 mortgage:
- 5% down: You could purchase a home for approximately $337,000.
- 10% down: You could purchase a home for approximately $356,000.
- 20% down: You could purchase a home for $400,000.
That’s approximately $63,000 more in purchasing power when moving from 5% to 20% down, assuming the same loan amount. However, a higher-priced home may also come with higher property taxes, insurance and maintenance costs. Your lender will consider these expenses when determining how much you can afford.
Down Payment Buying Power Calculator
Enter the mortgage amount you qualify for and move the slider to see how much home each down payment percentage supports.
- Home price this loan supports
- $336,842
- Cash needed for the down payment
- $16,842
- Buying power compared with 5% down
- Starting point
- PMI on a conventional loan
- Usually required
Example: a $320,000 mortgage supports a home price of about $336,842 with 5% down, $355,556 with 10% down and $400,000 with 20% down. Moving from 5% to 20% down adds about $63,158 in buying power for the same loan amount. Estimates exclude closing costs, property taxes and insurance; your lender sets what you qualify for.
How Does a Bigger Down Payment Affect Your Mortgage Payment?
A bigger down payment reduces the amount you need to borrow, which can lower your monthly mortgage payment. Here’s how different down payments affect a $400,000 home, assuming a 30-year fixed mortgage at an illustrative 7.40% interest rate.
Down Payment vs. Monthly Payment on a $400,000 Home
Cash down, loan amount and monthly principal and interest at 5%, 10% and 20% down.
| Down payment | Cash down | Loan amount | Principal and interest |
|---|---|---|---|
| 5% down | $20,000 | $380,000 | $2,631 per month |
| 10% down | $40,000 | $360,000 | $2,493 per month |
| 20% down | $80,000 | $320,000 | $2,216 per month |
Illustrative 30-year fixed rate of 7.40%. Principal and interest only; excludes property taxes, homeowners insurance, mortgage insurance, HOA fees and closing costs. Putting 20% down instead of 5% lowers principal and interest by about $415 per month.
Putting 20% down instead of 5% saves approximately $415 per month in principal and interest. It may also eliminate private mortgage insurance (PMI) on a conventional loan.
These estimates exclude property taxes, homeowners insurance, mortgage insurance, HOA fees and closing costs. Actual rates and payments depend on your lender, credit and loan terms.
What Are the Benefits of Making a Large Down Payment?
Lower Mortgage Payments
A larger down payment reduces the amount you borrow and the interest you pay over the life of the loan, assuming the same rate and term. On a $400,000 home, increasing your down payment from 5% to 20% reduces the loan from $380,000 to $320,000.
A lower loan-to-value ratio may also help you qualify for better loan terms, although a lower interest rate is not guaranteed. Compare lender rates, fees and mortgage insurance costs before deciding.
Less Mortgage Insurance
Many conventional loans require private mortgage insurance (PMI) when the down payment is below 20%. With a 20% down mortgage, borrowers can generally avoid this additional monthly expense.
PMI costs vary by borrower and loan. FHA, VA and other loan programs have different requirements. See REMAX’s 20% down payment comparison for more details.
Stronger Loan Application
A larger down payment reduces the lender’s risk and may improve your financing options. It can also provide more flexibility if the property appraisal comes in below the purchase price. However, lenders still review your income, credit, debts and property value. Consider the costs of moving from renting to owning when deciding how much to borrow.
What Are the Disadvantages of a Large Down Payment?
Less Cash Available
Putting more money into a home leaves less savings for emergencies, repairs, moving expenses and other needs. Home equity is not as easy to access as cash in a savings account. Using it later may require refinancing, selling the property or qualifying for a home equity loan.
Longer Time to Save
Saving for a larger down payment may delay your home purchase. During that time, home prices, mortgage rates and rental costs could change. Waiting is not necessarily a bad decision, but reaching 20% down should not be your only consideration. Your finances and buying timeline matter, too.
Limited Emergency Savings
A large down payment can leave you financially stretched after closing, especially if unexpected repairs or other expenses arise. Before committing, calculate how much you’ll have left after the down payment, closing costs and immediate expenses. REMAX’s first-year homeownership budget can help you prepare.
If a 20% down payment would leave you with very little savings, consider whether a smaller down payment would better suit your finances.
Does a Higher Down Payment Make Your Offer Stronger?
Yes, a larger down payment can make your offer more attractive by showing sellers you have strong financing. However, sellers also consider the offer price, contingencies and closing timeline.
A buyer putting 20% down won’t necessarily beat someone putting 10% down with better contract terms. Your agent can help you make a competitive offer while protecting your interests.
A larger down payment also doesn’t prevent appraisal issues. If the home appraises below your offer, you may need additional cash or have to renegotiate. Review comparable sales before deciding on a price.
Should You Put 5%, 10% or 20% Down?
The right down payment depends on your savings, monthly budget and loan options. Compare how each percentage affects your mortgage payment, interest rate, mortgage insurance and remaining cash.
You don’t always need 20% down to buy a home. However, remember to budget for closing costs, repairs and emergencies.
Before deciding, ask your lender to compare different down payment options. A larger down payment may lower your monthly costs, but keeping enough savings after closing is just as important.
Frequently Asked Questions
How would a bigger down payment be beneficial to borrowers?
It lowers the loan amount for a given purchase price, can reduce monthly principal and interest and may reduce or avoid mortgage insurance on eligible conventional loans.
Does a bigger down payment let me buy a more expensive house?
Potentially. More cash can support a higher price with the same mortgage balance, but taxes, insurance, debt and lender requirements still limit affordability.
Is 20% down required to buy a home?
No. Many eligible buyers use loan programs that allow less than 20% down, though the costs and qualification rules differ.
What are the disadvantages of a large down payment?
You have less liquid cash for emergencies, repairs and other expenses. Reaching a higher down payment may also delay your purchase.
Does a higher down payment make your offer stronger?
It may help show financing strength, but the seller will also consider price, contingencies, timing and the likelihood of closing.
How Much Should You Put Down on a House?
A bigger down payment can help you afford a more expensive home or reduce your monthly mortgage payment. However, putting more money down isn’t always the better choice, especially if it leaves you with limited savings for closing costs, repairs and emergencies.
Before deciding between 5%, 10% or 20% down, compare your estimated monthly payments, mortgage insurance costs and remaining cash. A local REMAX agent can help you explore homes within your budget while your lender reviews your financing options.
