Why The Size of Your Down Payment Matters: An Insight from Faber Real Estate Team

The decision to buy a home is a significant milestone in anyone's life. Among the myriad considerations you'll face is determining the size of your down payment. Conventional wisdom suggests a 20% down payment as a standard practice. However, there are scenarios where paying more or less than this amount can be a strategic move. At Faber Real Estate Team, we understand that every buyer's situation is unique. Here, we delve into why you might want to consider a down payment higher or lower than 20%.

The Case for More Than 20% Down

Faster Equity Building

A higher down payment reduces the amount you'll need to borrow, allowing you to build equity in your home more quickly. This is particularly valuable for those who are keen to own their home outright in a shorter time frame.

Lower Monthly Payments

More money down means smaller monthly mortgage payments, offering you greater financial flexibility.

Competitive Advantage

In a hot real estate market, a higher down payment can make your offer more attractive to sellers, possibly tipping the scales in your favor.

The Case for Less Than 20% Down

Liquidity

A smaller down payment keeps more of your money liquid, which can be advantageous if you can earn a higher return on that cash through other investments like stocks or a high-yield savings account.

Entry into the Market

If home prices are rising rapidly in your desired location, a smaller down payment can help you enter the market more quickly, rather than waiting to save up a 20% down payment while prices escalate.

Diverse Investment Portfolio

If you find that your money could yield higher returns elsewhere—such as in an investment property or a new business venture—a smaller down payment could free up your income for these opportunities.

Leverage

While it comes with higher monthly payments, a smaller down payment allows you to leverage your investment, possibly resulting in higher returns as property values increase.

Consultative Approach

Choosing the right down payment is a nuanced decision and should be made in consultation with financial advisors and mortgage loan officers. The size of your down payment will depend on a variety of factors including your financial situation, long-term goals, and the market conditions. While the traditional 20% down payment has its merits, there are valid reasons to consider paying more or less.

Connect with Faber Real Estate Team

If you need assistance figuring out which kind of loan to obtain, what size of down payment to make, or which lenders to work with, the Faber Real Estate Team is here to help. Our team is committed to offering personalized guidance to help you make the best choices for your unique situation.

Feel free to reach out to us; we'd love to assist you in your home-buying journey.  Our expertise and consultative approach will help you make informed decisions that align with your goals.