Buying A Home
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What do you think is better?

Putting down a larger down payment with a higher interest rate, or having a smaller down payment but a lower interest rate?  
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Re: What do you think is better?

  • image NinaTony:
    Putting down a larger down payment with a higher interest rate, or having a smaller down payment but a lower interest rate?  

    Smaller DP with lower IR. That's just me though....I feel like that would allow me to have more liquid assets to play with.  

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  • This doesn't make sense to me.  A lot of times you get a slightly lower interest rate for having a larger down payment.  But I don't see the opposite happening unless you have crappy credit.

  • image atlcatlover:

    This doesn't make sense to me.  A lot of times you get a slightly lower interest rate for having a larger down payment.  But I don't see the opposite happening unless you have crappy credit.

    This is true but strange things are happening in real estate. I work in the field and you can get away with not putting much down and having low interest... 

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  • It depends on how low you need your payments to be for the long run. If you can afford the high monthly payments with the "less down" option then you will pay less in the long run.  That being said, there is something to be said for having small payments for the next 10-30 years and let's be honest, interest rates are pretty low right now to a refi might not make sense down the road.  

    I'm not a loan officer or a financial planner so I was hesitant to comment on this but I would run the numbers both ways and see what makes scene for your situation.  There are really too many factors at play for anyone on here to give you realistic good advice.   


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  • We got a lower interest rate through a 3.5% down FHA loan as opposed to a conventional loan with a higher interest rate. In the short term, we pay more because of our PMI, but in the long term it will cost us way less because of the interest rate. I think you just need to do the math and assess your needs now as well as what you think they will be in the future and go from there. Everyone's situation is different.
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  • You need to crunch the numbers on the total costs of both loans in order to decide. Your loan officer or financial planner should be able to help with that.

    In our search, a lower down payment loan was a higher interest rate AND required PMI. Having 20% down and aggressively bidding lenders against one another allowed us to lock-in an interest rate that was under market rates.

  • 90% of the time, having the lower interest rate is better. this gives you more money in your pocket, which, for new homeowners is huge (buying furniture, fixing things, etc). 

     while initially the loan will be larger, the lower interest rate will ensure that more of your money goes to the principle of the loan, instead of paying interest....so over time, you'll actually pay less.

    keep in mind you can always double up payments or make an extra payment per-year.  this is a decent way to pay off your loan a little early (so take that extra down payment money, and keep making extra payments).

     

    i agree with others though. run the numbers both ways, and see what's more comfortable for your short term future.

     


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