Down Payment Calculator

What the down payment changes

A down payment does three things at once. It reduces the loan, which reduces the monthly payment. It changes the loan-to-value ratio, which decides whether you pay mortgage insurance. And it changes the total interest, because a smaller loan at the same rate costs less every month for 30 years.

Only the first of those is obvious on a listing site. The other two are where the money is. On a $400,000 house at 6.5%, moving from 20% down to 5% down adds $553 a month and $76,527 of interest over the term, and most of that is not the down payment at all. It is the larger loan plus the insurance that comes with it.

Loan-to-value, or LTV, is the loan divided by the price or the appraised value, whichever is lower. A $320,000 loan on a $400,000 house is 80% LTV. A $380,000 loan is 95%. Those two numbers sit on opposite sides of the line that decides whether private mortgage insurance applies.

The 20% line and private mortgage insurance

Private mortgage insurance protects the lender, not you. It pays a claim if you default and the sale of the house does not cover the loan. The Consumer Financial Protection Bureau explains PMI as a cost you carry when a conventional loan is above 80% loan-to-value, and the premium goes on top of principal and interest every month.

Pricing runs from about 0.3% to 1.5% of the loan a year. A 95% LTV loan with a 760 credit score might price near 0.55%, while the same loan with a 660 score can price above 1.1%. On $380,000 that is the difference between $174 and $348 a month.

PMI does end. The Homeowners Protection Act gives you the right to request cancellation at 80% of the original value, and requires the servicer to terminate it automatically at 78%. Both points are measured against the original amortization schedule, so the date is set the day you close.

That schedule is why the true cost of a small down payment is bigger than the monthly premium suggests. At 5% down on a $400,000 house, the balance does not reach 78% until month 135, which is more than 11 years of payments.

Those totals assume the minimum payment every month and a 0.55% annual rate. Extra principal payments shorten the schedule, and a new appraisal can also support an early cancellation once the house has gained value, though lenders set their own rules for that.

A $400,000 house at five down payment levels

Same house, same 6.5% rate, same 30-year term. The only variable is the down payment.

Two things stand out. The payment falls about $125 for every extra 5% down, which is steady and predictable. The insurance line does not fall steadily at all: it disappears entirely at 20%, which is why that threshold gets so much attention.

The 3.5% row is the cheapest way in and the most expensive one over 30 years. Run as an FHA loan it also carries a $6,755 upfront premium financed into the balance, which lifts the loan to $392,755 and the payment to $2,482.48, with $20,755 due at closing before costs.

FHA and VA: different minimums, different insurance

Government-backed loans set their own floors, and the insurance works differently from PMI.

FHA allows 3.5% down with a credit score of 580 or higher. It charges an upfront premium of 1.75% of the base loan, which can be financed, plus an annual premium of 0.55% on a 30-year loan. HUD's rule is that the annual premium runs for the life of the loan when the loan-to-value at origination is above 90%, and for 11 years when it is at or below 90%. That means the only way to escape it on a 3.5% down loan is to refinance out of FHA.

VA loans allow 0% down for eligible borrowers. There is no monthly mortgage insurance, but a funding fee applies, and it varies with the down payment, the number of times the benefit has been used and whether the borrower has a service-connected disability. On a $400,000 loan with no down payment, the principal and interest alone is $2,528.27 a month.

Conventional programs go as low as 3% down on some first-time buyer products, but they carry PMI at that LTV, so the monthly cost can land close to FHA. The difference is that conventional PMI can be removed, while FHA's annual premium usually cannot without a refinance.

The program choice often matters more than the down payment percentage. A VA borrower at 0% down pays less each month than an FHA borrower at 3.5% down, because the VA loan has no monthly insurance premium at all.

Monthly payment is not the whole bill

The monthly figure is what people compare, and the total interest is what they pay. On a 30-year loan at 6.5%, interest adds up to more than the amount borrowed.

A $320,000 loan costs $408,142 in interest over 360 payments. A $380,000 loan at the same rate costs $484,669. The loan is $60,000 bigger, and the interest is $76,527 bigger, because the extra balance is borrowed for the full term at 6.5%.

Shortening the term changes the shape of that. The same $320,000 at 6.5% over 15 years costs $2,787.54 a month, but total interest drops to $181,758. That is $226,384 less interest for $765 more each month, and the loan is paid off 15 years sooner.

Run both numbers before you decide. A 30-year loan with a 15-year payoff plan only works if you make the extra payments, and most borrowers do not. The 15-year contract forces the discipline and prices it at a lower rate, usually 0.25% to 0.5% below the 30-year.

Saving the difference: what 15 points costs in time

Going from 5% to 20% down on a $400,000 house means finding another $60,000. At $500 a month, that is 120 months, or 10 years, before any interest on the savings.

Ten years of waiting has a price of its own. Rents rise, the house you wanted may not be available, and the rate you qualify for in a decade is unknown. Meanwhile the $553 a month you would have paid on the smaller down payment is money you keep in the meantime, which is the trade the calculator shows.

A middle path works for many buyers: put down enough to clear PMI if the cash exists, and otherwise put down what leaves a reserve. Ten percent down on $400,000 costs $165 a month in PMI and keeps $40,000 in your pocket compared with 20%. Whether that is a good trade depends on what else that $40,000 would do.

If the $40,000 would sit in a savings account at 4%, it earns about $133 a month before tax, which nearly covers the PMI. If it pays off a credit card at 22%, it saves $733 a month and the decision is not close. Compare the PMI rate with the return on the money, not with zero.

Cash at closing, and the reserve lenders check

The down payment is not the only cash you need. Closing costs, prepaid taxes and insurance, and the upfront premium on an FHA loan all land at the same time.

Closing costs commonly run 2% to 5% of the price, so a $400,000 purchase carries $8,000 to $20,000 on top of the down payment. Prepaid items are part of that: you fund the escrow account for property taxes and homeowner's insurance at closing, and the amount depends on when in the year you close.

Lenders also look at reserves, the money left in your accounts after closing. Two to six months of payments is a common requirement, and it is a real constraint for buyers who put every dollar into the down payment. A borrower with 20% down and no reserves can fail underwriting that a borrower with 10% down and six months of reserves passes.

Keep the reserve in a separate account and do not move it around during underwriting. Large unexplained deposits get flagged, and a gift from a family member needs a letter and a paper trail. The CFPB mortgage guides walk through what lenders ask for and why.

When a bigger down payment is the wrong move

A down payment is an investment with a fixed return: your mortgage rate. Every dollar you put down avoids 6.5% interest, which is a solid, risk-free 6.5%. That is a good return and a bad one at the same time, depending on what the alternative is.

• Credit card debt at 20% or more. Pay it off first. No down payment returns 20%.
• An emergency fund below three months. A house comes with a water heater, a roof and a furnace, and a $6,000 repair on a card at 22% costs more than the PMI it avoided.
• An employer 401(k) match. A 50% match on the first 6% of pay is an instant 50% return. Never trade that for a down payment.
• Retirement savings at 30 years old. Money invested for 35 years at 7% roughly doubles every decade, which beats 6.5% on a mortgage.

What is left after those four is the money that belongs in the down payment. For most buyers the answer lands somewhere between 5% and 20%, not at either end, and the right number depends on the reserve it leaves behind.

This is an estimate for planning, not lending or tax advice. Rates, premiums and program rules change, so confirm the numbers with a lender and the program's official guidance before you commit.