Down Payment Calculator

A down payment is the upfront cash you pay toward a home purchase, expressed as a percentage of the purchase price. The remaining amount is financed through a mortgage. Down payment size directly affects three key aspects of your loan: the loan amount (and therefore monthly payment), whether you must pay Private Mortgage Insurance (PMI), and the interest rate you qualify for. Larger down payments reduce your loan balance, lower your monthly payment, and often earn you a better interest rate.

The critical threshold in down payment planning is 20%. When you put down less than 20%, conventional lenders require Private Mortgage Insurance -- a monthly premium that protects the lender (not you) against default risk. PMI typically costs 0.5% to 1.5% of the loan amount per year, adding $100-$350/month on a $300,000 loan. PMI is automatically removed once your loan-to-value ratio reaches 78% through principal paydown or home appreciation, but those payments in the early years represent significant added cost.

Different loan programs have varying minimum down payment requirements: conventional loans require as little as 3% (Fannie Mae HomeReady or Freddie Mac Home Possible programs), FHA loans require 3.5% with a 580+ credit score, VA loans offer 0% down for eligible veterans, and USDA loans offer 0% down in qualifying rural areas. Investment properties typically require 15-25% down with conventional financing. Each option involves tradeoffs between upfront cash, monthly payment, PMI costs, and interest rate.

Follow these steps to compare down payment scenarios:

1. Enter the Home Price -- Input the purchase price of the home. The calculator will compute down payment amounts for multiple percentage levels (3%, 5%, 10%, 15%, 20%, and 25%).
2. Set the Interest Rate -- Enter the mortgage interest rate you expect to receive. Actual rates depend on credit score, loan type, and market conditions. Check current rates from multiple lenders for the most accurate comparison.
3. Choose the Loan Term -- Enter the loan term in years. Standard options are 30, 20, or 15 years. Shorter terms have higher monthly payments but lower total interest.
4. Set the PMI Rate -- Enter the annual PMI rate. Typical rates range from 0.5% to 1.5% depending on your credit score and down payment percentage. Borrowers with 760+ credit scores pay the lowest PMI rates.
5. Compare All Scenarios -- The table shows each down payment level with the loan amount, monthly principal and interest, monthly PMI (if applicable), total monthly payment, the month PMI drops off, and total PMI cost. The highlighted cards for 5%, 10%, and 20% down provide quick comparisons of the most common scenarios.

The optimal down payment amount depends on your financial situation and investment strategy. Putting 20% down eliminates PMI and results in the lowest monthly payment, but it requires more upfront capital. For a $350,000 home, the difference between 5% and 20% down is $52,500 in additional cash. If you could invest that $52,500 elsewhere at a higher return than the effective cost of PMI plus interest, a lower down payment may be the better financial decision.

PMI is not always money wasted. On a $350,000 home with 5% down, PMI might cost $175/month for approximately 7 years until you reach 80% LTV. The total PMI cost of roughly $14,700 is the price of getting into the home 5+ years sooner with $52,500 less cash. If the home appreciates at 3% per year, it gains $10,500+ in value in year one alone -- more than offsetting the PMI cost. For buyers in appreciating markets, low down payments with PMI can actually accelerate wealth building.

For investment properties, the calculus is different. Most conventional lenders require 20-25% down for investment properties, and PMI is not available (investment loans above 80% LTV are rare). The higher down payment is offset by the ability to use leverage on an income-producing asset. If a rental property generates a 10% cash-on-cash return on a 25% down payment, you are earning a higher return than most alternative investments. Consider reserving cash for multiple smaller down payments across several properties rather than making one large down payment on a single property -- diversification reduces portfolio risk.