Advice on Down Payment

[Armando Carrera]

Hi everyone,

Need some advice.

Will be purchasing another investment property but stuck on which route to go.

Purchase price being the same

Do:

15% down w/ 8% interest 

Or

25% down w/ 7% interest. 

I’m leaning towards one over the other but would like some feedback.

thanks everyone 

[Armando Carrera]

Quote from @Bill B.:

Imagine $400k purchase. (The numbers don’t matter for payback period, just somewhere to start.)

$60k down for $27,200 interest on $340k

$100k down for $21k interest in $300k. 

Now only will you break even and have a 100% return in 6 years. Plus you’ll have a higher cash flow monthly.  The only reason I see not to take the lower rate is a plan to sell or refinance within 3 years or less. You are literally being given a guaranteed 8% return. That’s pretty good. As a bonus you get the extra cash flow and you can refinance with a regular lender anytime without brining more money to the table. (A regular lender is going to require 25% equity.)

Bill thank you. Just to play devil’s advocate, many people on here say to keep as much of your own as money possible. That’s why I brought up both scenarios