Basics

One way to decide on how much of a downpayment you should make (if any) is to compare the monthly mortgage payment when you put down different amounts.

Your downpayment is based on:

• property price
• interest rate
• loan length
• loan type

The property price is obviously the biggest factor in your monthly payment.

When you have several loan offers from different mortgage sources you can take an intelligent guess about what your interest rate, loan length, and loan type will be. The longer your loan term is the lower your monthly payment will be.

The loan type is whether the loan is a regular loan, interest only loan, or a minimum payment loan. An interest only payment is lower than a regular loan because no principal is being paid. A minimum payment option is lower still because the borrower is paying less than the interest only payment.

You can compare different downpayments to see which monthly payment you are comfortable with.

After you do the math you will see that putting 10% down on a property does not affect your monthly payment by very much. It is a very large payment up front for not much savings on a monthly payment. You will end up paying less interest in the long-term. This may be a priority for you instead.

Because the monthly payment is not reduced by very much even with a 10% down payment many borrowers choose 100% financing even though they may be able to afford a downpayment.

Keep in mind that in general the more you put down on a property the lower your interest rate will be. Some loans may only be available if a borrower puts 5% or 10% down.

There are many free mortgage calculators available online to help you figure this out.

Source: www.articletrader.com