How much do you put down?

[Jim Piety]

Considering money is cheap right now, it makes sense to borrow as much as you can. However, a larger down payment reduces the monthly payment and helps increase cashflow. Plus, if you have a larger amount of equity, can you not pull the money out with a HELOC to invest in additional properties?

I understand that a HELOC is not free, like cash. But I'm curious what other investors' thoughts are.

My specific example is comparing 3.5% vs traditional 20% down for a primary home. So PMI leads to a large amount of savings. But, this question is applicable to 20% vs 30%.

Thanks!

[David A Lisowski]

@Jim Piety

If going for traditional financing, it's best to ask the lender for different Loan Estimates.

It's weird but if you are going to have MI (less than 20% down), you typically get the best rate at 15% down (85% LTV). Ask for LEs at 15% and 20% down.

MI on investments does not drop off at 78% LTV like a primary or second home. You can request at 70% and 65% LTV. Automatically drops at midpoint of loan.

You never get MI back.

You can do a cost analysis of paying the MI to that point on the amortization schedule versus having to increase the down payment.

I think investors want to avoid MI because it feels like wasted money. But if you are refinancing or tapping equity or selling before the break-even, it might be worth less down and having MI. On the other hand, if you plan to buy and hold, the MI cost overall might be so small compared to other factors...

I don't know. It feels like it's cheap to borrow now so it's worth putting less down to invest in more property, but you also don't want to be spread too thin and be over-leveraged.