What affect does a larger down payment have on mortgage payments?
June 21, 2008 · Print This Article
James T asked:
I’m in the first steps of buying a condo, and I’m a bit confused as to what a larger/smaller down payment actually does to the mortgage payment. In all of the mortgage payment calculators I’ve gone to online, increasing or decreasing the down payment has no effect on the monthly payment and only decreases the term. I am confused because I set the term to 30 years, but its still changing the life of the loan.
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I’m in the first steps of buying a condo, and I’m a bit confused as to what a larger/smaller down payment actually does to the mortgage payment. In all of the mortgage payment calculators I’ve gone to online, increasing or decreasing the down payment has no effect on the monthly payment and only decreases the term. I am confused because I set the term to 30 years, but its still changing the life of the loan.
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Josh Dunaway has been a certfied Realtor in the suburban Chicagoland area for over 20 years. Aside from starting his own real estate company, he also owns a mortgage company as well.
The larger your down payment, the less your loan will be and the less your payments will be.
the larger your down payment, the smaller the monthly payment. the loan calculators assume you want to keep the same payment, so they are actually telling you how long it will take to pay it off at that payment. You actually save ALOT of money with a real big down payment, because you pay less interest.
First, the idea of a condo in this current market is not wise. They are a dime a dozen and unless you are stealing it then it is bad idea. Trust me. I do foreclosure bulk sales for a living and we can’t give condos away.
As far the effect on your payment, the rule of thumb is $7 per thousand. Put ten thousand down and the payment drops about $70 a month assuming an interest rate around 7%.
I hope this helps.
if you can put enough down to shortin
up the term, 20-30%…the only time youll ever see what your saving, is on paper before you sign on the dotted line….do the math, see what you can live with, and remember the future…..
Larger downpayments decrease the monthly payment and total payment over the life of the loan.
Also if you do not put down at least 20% you will have to pay PMI–private mortgage insurance–which is for the benefit of the lender NOT you.
I wonder if you arrowed back to enter a different term or something that made the calculator not work. Or did you have a fixed monthly amount that was set when you used the calculator? Something went awry.
As others have answered, it will reduce the payment however, I want to mention that you have to find the right balance on how much you want to put down. I can help you do that. Just visit the site below and fill out the sort form on the main page.