In more detail
The down payment sets the loan amount and the LTV: the loan is the price minus the down payment. A larger down payment lowers the loan, the monthly payment and total interest, and with many conventional loans putting down less than 20% means paying mortgage insurance. Buyers also need cash for closing costs and moving, which the down payment does not cover. Minimum down payments vary by country and loan programme, from 0% for some government-backed loans to 20% or more elsewhere.
Why it matters
Emptying your savings for a bigger down payment can leave no reserve for the first repair or a job loss. A smaller down payment keeps cash available but costs more each month and leaves thinner equity if prices fall.
Example
On a $300,000 home with a 6.5%, 30-year loan:
| Down payment | Loan | Monthly payment |
|---|---|---|
| 20% ($60,000) | $240,000 | $1,516.96 |
| 10% ($30,000) | $270,000 | $1,706.58 |
The smaller down payment costs $189.62 more a month; over 30 years that is $68,263.35 more in payments, of which $38,263.35 is extra interest, before any mortgage insurance.