Asset Brief is an independent publisher focused on helping you improve your financial decisions. Some of the products featured may be from our partners. This does not influence our reviews, which are based on many hours of research.
How to use this calculator
Buying a house requires that you have enough down payment and can make the monthly mortgage payments. Our calculator helps you understand how much house you can afford given the amount of money you have saved for a down payment.
This calculator takes the amount of money you are willing to spend on a down payment and estimates what house you can afford assuming a specified down payment percent.
We use the following formula.
Most lenders require a minimum down payment of 20%.
The remainder of the house price is how much mortgage you need to take out. We calculate your monthly mortgage payments, total interest you will pay over the life of the mortgage, and total payment based on:
- Mortgage interest rate: What mortgage rate do you expect to borrow at?
- Loan term: How many years will your mortgage be for? Most mortgages have 30 year terms.
What is a down payment?
A down payment is the cash you pay upfront when you purchase a house. It is typically expressed as a percentage. For example, a 20% down payment on a $500,000 home is 20% x $500,000 which is $100,000.
Why do you need to make a down payment? The down payment is your equity in the home right off the bat. If you put down 20%, then you own 20% of your home immediately.
For lenders, the down payment de-risks their mortgage loan to you. The difference between the house price and your down payment is the size of your mortgage. The smaller your down payment, the bigger the mortgage, and the bigger their risk.
How much down payment do you need?
The generally recommended down payment percentage is 20%. Most borrowers are required to put down between 5% and 20% of the home price, but this can vary depending on the lender and your credit history.
Those with better credit can put down less, while those with worse credit may need to put down more.
Benefits and Drawbacks of Bigger and Small Down Payments
You can decide to put down more than 20% on a house or put down less. There are pros and cons to both.
Bigger Down Payment
Here are the benefits and drawbacks of putting down more than 20% on a house.
- Smaller mortgage: Because the mortgage size is the difference between the house price and your down payment, the larger your down payment, the smaller the mortgage you will need.
- Small monthly payments: With a smaller mortgage, your monthly mortgage payments decrease, which frees up more money for you to spend on daily life.
- Higher equity in your home: With a higher down payment, you immediately own more of your home.
- Better interest rates: You will generally be seen as less of a risk for most lenders and may be able to get lower interest rates, further reducing your total mortgage payment.
- Requires more cash: A bigger down payment requires that you have saved more money.
- Opportunity costs: In a low interest rate environment, you may have better uses for your money than using it for your down payment. Because the cost of borrowing is low, you could redeploy your cash in other ways.
Smaller Down Payment
Not all lenders will allow a smaller down payment, although some will.
- More cash on hand: Because you are spending less on your down payment, you will have more cash on hand which you can use to invest, decorate the home, go on vacation, and more.
- Larger mortgage: Because you are putting less down, you will now need to take out a larger mortgage to cover the cost of the house.
- Larger monthly payments: With a larger mortgage, comes larger monthly payments, which may eat into you monthly budget.
- Less equity in your home: Right off the bat, you own less of your home.
- Worse interest rates: Because lenders will see you as a more risky borrower, you may have higher interest rates, further increasing your total mortgage payment.
- Insurance: You may be required to take out a private mortgage insurance.
How much down payment should you put down?
Use our calculator to see how much your down payment affects what monthly mortgage payment you are comfortable with and what price house you can afford.
Play around with the calculator and try a few different scenarios. What happens if you increase or decrease your down payment percent? How does this affect the total interest you will need to pay?