First Time Home Buyers - Down Payment Question

[Flyingstache]

Hello,

My wife & I are buying a home for $167,500. We have around $50k in the bank & we are wondering how much should we put down as a down payment. We will put at least 20% down.

If we know that we will do upgrades to the home within the first 2 years should we set aside money for this now or save each month? If the interest rate is around 3.75% or lower, does it make more sense to do 20% down & keep the other cash for investments or to keep liquid for things that might pop up, or do we put more down up front to get the loan amount down?

Thanks for any input.

Have a great day!

[Finallyunderstand]

I would just do 20%, complete your upgrades and then reevaluate.  If you put more down initially then it's stuck in there.

[Lmoot]

 There's no reason to put more than 20% down. Especially if you are planning on doing upgrades. Putting more down won't make it the loan cost any less, and most banks will let you pre-pay early if that is something down the line you decide to do.

[Jesstache]

Minimum amount to get the best rate, which is usually 20%.

[Flyingstache]

Thank you all for the input it is much appreciated.

My biggest thought with putting more money down was avoiding the interest on the additional money. I assume most would say put the basic 20% down & then invest the rest & you will make more $ in the long run?

Do you have any suggestions on 30yr vs 20yr vs 15yr? Obviously the 30yr will allow the lowest monthly payment but the others mean less interest in the long run.

Thank you again for your input.

[Lmoot]

 I would not be worried about using more capital just for the sake of saving a little interest, at the beginning of the loan. Especially being first time homebuyers you probably know very little about the hidden costs of homeownership, especially in the first few years. Let things settle down. The upgrades you want to do are only what you plan to do; houses have a way of throwing in their own plan. For example, how old is the roof? Your insurance company may be requiring you to replace it in the next few years, like they did for me. They gave me six months to replace an $8000 roof. When I was forced to switch insurance, they determined I needed to rewire the house. That was another eight grand. None of it was my plan, at least not at that particular time. Things will happen likely, in the next few years, that will make any attempt to save 3.75% seem trivial. And you will wish you had the cash instead. Or you will find yourself borrowing it back at a higher rate through a HELOC.

[Flyingstache]

The roof is 19 years old so it very well will likely need replaced in the near future.

Here is some further information

So far we have been quoted the following interest rates (if we put 20% down or more)

30yr at 3.875% which results in a payment around $875 (with insurance & taxes included)

20yr at 3.75% which results in a payment around $1,025 (with insurance & taxes included)

15yr at 3.5% or 3.375% (15yr has had the only difference in rate so far) which results in a payment around $1,150


We view this home as a great starter home & good investment. We see ourselves living here for 5-10yrs. It is in a great neighborhood & has good rental potential if we go that route. It was being rented out for $1,400/month. With our projected timeline we didn't know if paying as much off now when we don't have kids would be best or paying the minimum & saving/investing is a better idea.

[HawkeyeNFO]

The roof is 19 years old so it very well will likely need replaced in the near future.

Here is some further information

So far we have been quoted the following interest rates (if we put 20% down or more)

30yr at 3.875% which results in a payment around $875 (with insurance & taxes included)

20yr at 3.75% which results in a payment around $1,025 (with insurance & taxes included)

15yr at 3.5% or 3.375% (15yr has had the only difference in rate so far) which results in a payment around $1,150


We view this home as a great starter home & good investment. We see ourselves living here for 5-10yrs. It is in a great neighborhood & has good rental potential if we go that route. It was being rented out for $1,400/month. With our projected timeline we didn't know if paying as much off now when we don't have kids would be best or paying the minimum & saving/investing is a better idea.

If you think it will become a rental, I recommend paying the minimum down payment to avoid PMI, and would go with the 15 year mortgage if it's affordable each month.  This way, your interest rate is lower, and once it's a rental, your cash flow won't have to pay the mortgage bill for very long, which means more income.