Making a more generous down payment has many benefits - especially over the long term. We understand you don't want to put off your dream home any longer than you have to, but here a few great reasons to wait a little longer and come up with a larger down payment.
1. You're More Likely to Get a Loan
First and foremost, the more money you have saved up, the more likely your lender is to give you an affordable mortgage. This is because the more you've managed to set aside, the less you're perceived as a risk. Because you'll be viewed as less of a liability, you'll have your choice of lenders as a larger percentage of lenders will be willing to loan you the remaining balance on your home.
2. You'll Save More
When you opt for a smaller down payment, you may think you're saving money. The reality is, you'll save far more making a larger down payment up front. This is because you'll enjoy lower monthly payments and, with a down payment of 20% or more, you'll be free of the additional cost of mortgage insurance.
3. You'll Get a Lower Interest Rate
Speaking of savings, when you make a larger down payment your lender is far more likely to give you a better interest rate on your mortgage. This is because the more money you save, the more your loan-to-value ratio improves, saving you a significant amount over the years of paying your mortgage.
4. You'll Have More Equity
Essentially the more of your home you actually own (the more you've paid off) the more equity you'll have. In this sense, making a larger down payment means you'll already have equity established. A larger down payment also means you're more likely to be protected in the event of a drop in market prices as you're less likely to end up in a negative equity situation.
5. You'll Get a Better Deal
Lastly, more money down means lenders won’t feel the need to make you jump through as many hoops. Because you're considered a lower risk candidate, they'll be more inclined to offer you a shorter term for your loan - meaning you'll be able to pay off your mortgage that much faster.
In short, if you're able to make a larger down payment, it's extremely well worth it in the long run. While saving a little more can take extra patience and perseverance, once you reap the long term rewards, you'll be glad you did.