Check Out These Benefits of a 20% Down Payment When Buying A Home
If you are a first-time home buyer, then you are no doubt excited about the purchase. Buying a home is not only a purchase that is wise financially, but it is also a purchase that will leave a legacy for generations to come. Since that is the case, you do well to understand the true benefits and drawbacks of purchasing. Of course, the most important part of the purchase is financing. Are you in a good place to make a large purchase? Do you have enough money to pay for the down payment? How much money are you willing to pay for a down payment? You do well to know what are some of the benefits of having 20% down when you are looking for a mortgage.
#1 You Pay Less for Your Home
When you are able to pay 20% down on your home, then you are giving a bigger chunk to your mortgage. The goal of paying for a mortgage should be to eventually have your own home free and clear. As long as you are paying on a loan, the home is not yours. When you pay less on the down payment, you will be making larger monthly payments. When you put down a bigger down payment, you pay less on your monthly payments, and you get your house paid off sooner.
#2 Your Interest Rate May Be Lower
Some banks will give you a mortgage with as little as 3% or 5% down, but you will definitely pay for that small percentage when it comes to your interest rate. When you pay 20% down, you show your lender that you have the ability to pay for the loan. When your lender feels like you are capable, it is more likely that you will get a better interest rate. A better interest rate means that you will get your house paid off faster, and your monthly payments will be less.
#3 You Can Avoid PMI
PMI is Private Mortgage Insurance; this is an insurance policy that your lender will put on your home in order to protect itself. This is insurance that the lender will give out to buyers who do not put down at least 20%. PMI is basically more money that you have to pay every month, so why give yourself more payments than you have to. This monthly fee will be automatically rolled into your mortgage payments, so you may forget about it, but it will still be there until you have built 20% of equity into your home.
The benefit to purchasing your home with 20% down
It is simple to see why it's smart to put 20% down, but things get blurry when your heart is involved. Before making the decision to purchase your home, make the right calculations and begin to save. You will benefit greatly by having at least 20% down, and you will move closer to getting rid of your mortgage completely. A home can be a blessing for your family, but if you do not have the money to buy it, it can also be a nightmare.