Suggestions on percent to put down on $300,000 home mortgage? (loan, how much)

[hockeyplayer9]

Hi. We will be moving from NY to NJ within the next year. We're going to buy a house. Our goal is to buy a home for $300,000.
We are not sure what would be better, to put down 20% , 30% , etc. We're thinking 30% would be better so that there will be less interest since there will be less principal.
Just curious as to some others opinions and experience. Thanks so much!!

[GiantRutgersfan]

Interest rates are very low, and you can always pay extra directly towards the principle if you so choose.

At a 4.5% interest rate, 30 years, with 30% down, you would pay $173,000 in interest

At a 4.5% interest rate, 30 years, with 20% down, you would pay $197,000 in interest

Your monthly payment would be around $150 less a month if you put down the extra $30,000 on the down payment today.

Personally, I would just put down the 20% and if you are able to, make extra payments towards the principle.

[beachouse]

It really depends on how much money you have.
Would putting down 30% clean out your savings?
I agree with the previous poster you can always pay extra principle,but this will shorten the term of the loan,and not change the monthly payment.
Cleaning out your savings is not good if unexpected expenses come up,or if there is a job loss.
I would much rather have the 30k in savings than have a $150 a month lower payment,unless I had $100k in the bank.

[hockeyplayer9]

Thank you two so much GiantRutgersfan and Beachouse. What you said makes a lot of sense so looks like we would go with putting down the 20%. The $25,000 we would save in interest over the 30 years would be nice, but not at the expense of having less in the bank. Plus, who knows what will be 20 or 30 years from now. Thanks again!!!!

[HalfFull]

How refreshing - choosing between 20% or 30% down.

[bradykp]

Originally Posted by hockeyplayer9

Thank you two so much GiantRutgersfan and Beachouse. What you said makes a lot of sense so looks like we would go with putting down the 20%. The $25,000 we would save in interest over the 30 years would be nice, but not at the expense of having less in the bank. Plus, who knows what will be 20 or 30 years from now. Thanks again!!!!

yeah, you would "save" $25,000 in interest if this is the house you stay in for 30 years, but you would also lost the "opportunity cost" of what you could earn on that $30,000. though the benefit of writing off mortgage interest is often overstated (you get a standard deduction without it, so the interest benefit is only the amount greater than the standard deduction), it's still something that can be written off, while you can put your money to work to earn around the same as what a mortgage currently costs with relatively low risk.

so to me, it's really a personal decision of whether you'd rather have that money as a "just in case" backup. with rates this low, i'd lean towards 20% down. however, if 30% down got you a better rate (which is unlikely), then i would consider it more strongly.

[JCK7778]

If you choose a bi-weekly payment instead of a monthly payment you will also save a lot of interest. It is 1 extra payment a year but can shave up to 10 years off your mortgage.

I just did it and I am shaving 7 years off the mortgage. I also pay an extra $20 a payment directly towards the principal.

Originally Posted by hockeyplayer9

Thank you two so much GiantRutgersfan and Beachouse. What you said makes a lot of sense so looks like we would go with putting down the 20%. The $25,000 we would save in interest over the 30 years would be nice, but not at the expense of having less in the bank. Plus, who knows what will be 20 or 30 years from now. Thanks again!!!!

[manderly6]

Personally I would do 20% and only that much to not have PMI. Rates are so low I rather have the money available for something else.

[HalfFull]

Originally Posted by JCK7778

If you choose a bi-weekly payment instead of a monthly payment you will also save a lot of interest. It is 1 extra payment a year but can shave up to 10 years off your mortgage.

I just did it and I am shaving 7 years off the mortgage. I also pay an extra $20 a payment directly towards the principal.

Just watch out for the lenders that want to charge you more for the "privilege" of paying like this

[JCK7778]

My bank charges $1.25 per payment, so for $2.50 a month the benefits still far outweigh the fees.

Originally Posted by HalfFull

Just watch out for the lenders that want to charge you more for the "privilege" of paying like this