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How does a down payment affect a mortgage?

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How does a down payment affect a mortgage?

Postby halley » Tue May 14, 2013 11:36 pm

I am a first time home buyer looking to get a mortgage for a house. My question is how I can include the down payment into the mortgage calculations. Let's say that the sale price is $200,000 and we are able to put 20% down ($40k). This will be at 3.5% for 30 years with monthly payments.

My question is, will the mortgage amount be for $200,000? Or will it be for $160,000 after we subtract the down payment?

There are also some online tools that allow me to include extra payments in the calculations. Should I put the down payment as an extra payment in year one? Or should it be subtracted from the loan amount?

Any help is appreciated.
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How does a down payment affect a mortgage?

Postby galterio » Tue May 14, 2013 11:40 pm

The down payment is subtracted from the purchase price and leaves the loan amount ($160,000). The 'extra payment' is optional if you'd like to pay down the principal and pay off the loan early. Keep in mind, in addition to the down payment, you'll likely be required to pay the first year of property tax, home insurance, title insurance, appraisal, credit report, and other misc. closing costs up front. Best of luck!!
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How does a down payment affect a mortgage?

Postby brynly » Tue May 14, 2013 11:45 pm

You got all the right answers as far as the down payment. As for paying extra each month, when you get your monthly statement, it will ask you if you want to pay extra. You can also request an amortization that will show you a complete breakdown between interest/principle. On a 30 year mortgage, it will take over 20 years before you see more principle than interest. If you afford a 15 year mortgage, there will be more principle than interest on your first payment.
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How does a down payment affect a mortgage?

Postby samson » Tue May 14, 2013 11:48 pm

The interest rate may not be higher for 10% vs 20% down, but you will have substantial monthly mortgage insurance with 10% down. Also, conventional loans are getting extremely difficult to do these days unless you have 20% down. The mortgage insurance companies are in bad financial shape so they are being super conservative. So this is why most people with less than 20% are going with FHA loans. FHA loans have similar interest rates to 20% down conventional loans, but FHA loans carry a lot of mortgage insurance. You have 1.75% up front MI that can be paid or rolled into the loan balance and .055 per month MI.
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How does a down payment affect a mortgage?

Postby adal » Wed May 15, 2013 12:06 am

You get a mortgage for the purchase price less your down payments. In this case, it would be $160,000.

TWIST: Some lenders let you finance closing costs, which would increase your mortgage amount.

Putting down 20% eliminates the need for private mortgage insurance (PMI). PMI can add a few hundred dollars to every monthly payment.
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How does a down payment affect a mortgage?

Postby duardo » Wed May 15, 2013 12:09 am

More down means less borrowed. Enough down eliminates Mortgage Insurance (PMI) which can add $100+ to your monthly payment.

The mortgage in your question would be for $160K. Down payment is not an extra payment.
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How does a down payment affect a mortgage?

Postby sayres » Wed May 15, 2013 12:20 am

your mortgage would be 160K
the down payment is does not go into those mortgage loan sites
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