Should You Put Less Down or Lower Your Monthly Payment?
AI illustration of two buyers outside a South Carolina home.
A smaller down payment can leave more cash in your bank account. A larger one can lower your monthly payment. Start by picking how much cash you want to keep after closing. Then compare the full monthly payment at two down payment amounts you can afford.
How much cash do you want to keep?
Set aside what you’ll need for the move, any repairs you expect, and bills that might surprise you. Ask your lender if the loan requires you to show that you’ll have money left after closing. Then see what you can put down after you allow for closing costs. Build a savings plan for your first home.
What changes on the same $300,000 home?
Say you have $80,000 saved. You compare two 30-year fixed conventional loans at an assumed 6.5% rate. Both use $9,000 for closing costs, including any costs paid ahead of time. The example assumes no deposits or credits, $400 a month for taxes and home insurance, and no HOA dues. The 5% option includes $125 a month for private mortgage insurance, or PMI.
For illustration only. These figures are based on the assumptions above. Ask for an estimate based on your loan and the home you want to buy.
| On a $300,000 home | 5% down | 20% down |
|---|---|---|
| Down payment | $15,000 | $60,000 |
| Cash to close | $24,000 | $69,000 |
| Cash left after closing | $56,000 | $11,000 |
| Loan payment before taxes and insurance | $1,801 | $1,517 |
| Monthly PMI | $125 | $0 |
| Estimated full monthly payment | $2,326 | $1,917 |
In this example, 5% down leaves you with $45,000 more in the bank. With 20% down, the first monthly payment is about $409 lower. If putting 20% down leaves you short for the move or a repair, ask to see an option in between. If the higher payment would strain your budget, compare a larger down payment or a lower home price.
What could the smaller down payment cost over time?
With 5% down in this example, you’d pay about $97,400 in interest and PMI over five years if PMI stays in place for all 60 months. With 20% down, you’d pay about $75,700 in interest. Those figures cover interest and PMI. Compare any difference in closing fees too. A larger down payment puts more of your cash into the home on day one.
PMI protects the lender and can add to the cost of a conventional loan when you put less than 20% down. Ask how it’s charged and when it may end. The rate, fees, and insurance can all change with your down payment. Read the CFPB’s guide to PMI.
Ask for two Loan Estimates based on the same home, loan term, and day. Compare the full monthly payment on page 1, cash to close on page 2, and the five-year figures on page 3. Include property taxes, home insurance, and any HOA dues in your budget even if you pay them on your own.
More help comparing down payments
Let’s compare two down payments
Tell us your price range and how much you want to keep in the bank. We can help you compare the cash you’d need at closing and the monthly payment at two down payment amounts.
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