Deciding down payment considering 6.625% interest rate

[Jessica Stanek]

Hi y'all! After an appraisal, I have the option to put down 14% instead of 20%. With this mortgage, that would save me $22,500. It would be nice to have that cash on hand for emergencies as well as to furnish the house (I wouldn't be investing the money). But considering my interest rate of 6.625%, I'm wondering if it makes sense to pay it towards the mortgage now. Thoughts? 

[Devin De Lange]

Hi Jessica, 

Here is my take!

Going with 14% Down:
Upside: You get to keep a nice chunk of change in your pocket. That's $22,500 you can use for any surprises life throws at you or to make your new house feel like home.
Downside: Your loan's gonna cost you more in the long run because of that higher interest rate (6.625% is no joke!). Plus, you might get hit with PMI, which is like giving away extra money every month for nothing.

Opting for 20% Down:
Upside: You'll save a ton on interest over time. No PMI fees. Your monthly payments? Lower.
Downside: It means parting with more cash upfront. That's less money in your pocket for emergencies or for furnishing your place.

So... Pay more now, save more later (20% down) or keep cash for a rainy day but pay more over time (14% down)? 

Good luck!!

[Dan M.]

Short answer: Dont pay pmi its a wasted expense. Your return on not paying that expense will far exceed the extra 6% down. 

[Benjamin Aaker]

You really do need to have cash on hand for emergencies. In my mind, that outweighs the additional interest you will pay.