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The Pros and Cons of a Large Down Payment When Buying a Home

Oct 10, 2023 | Home Buying

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If you are in the market for a new home, one of the considerations you will need to make is how much to invest in your down payment. Let’s take a quick look at some of the pros and cons of making a large down payment when buying your next home.

A Large Down Payment Has Its Benefits

If you have the funds available, you may find a bit of an advantage in a large down payment. Here are a few potential benefits that you may realize:

You Can Afford More ‘House’

if you are aiming for a large, luxurious home a significant down payment can help you get there. As long as your credit is in line with your needs, a large down payment leaves more room in your mortgage.

You May Pay Less Interest

conversely, if you don’t need to carry a big mortgage you can choose a shorter amortization period for your mortgage. A shorter loan period means that you are likely to pay less in interest.

You Might Not Need PMI

if you can afford to invest more than 20 percent of the home’s value in your down payment, you may not be required to purchase private mortgage insurance.

Do You Have The Money?

a large down payment doesn’t make a lot of sense if your finances can’t tolerate that hit right now. If you have your down payment and little else, you might want to reconsider.

You Will Be Less Liquid In The Short Term

keep in mind that once you sign the closing paperwork, your down payment cash is gone. This will leave you a bit less liquid in the short term since you would need to sell your home to get that cash back out.

You Can’t Invest That Money Elsewhere

you won’t be able to use these funds for other investment purposes. Of course, real estate is an investment itself so this may be less of a concern.

If you are considering selling your home, be sure to contact us at (616) 805-9696 or email us at joel@jtkpropertysolutions.com so we can provide you with a Fair Cash Offer on your Grand Rapids house.

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  • D T

    Great to work with JTK! The team communicates well and keeps everyone in the loop. They helped out and got the work done. They really help people out of tough spots and offer other solutions when not a good fit just to try and help. Joel and his team know the market and are extremely professional.

  • Courtney Van Horn

    Honestly, there aren't better people in this industry. Amber and Joel communicate very well and work so hard with their clients to ensure a smooth transaction. They are genuine people who understand real estate and all the good and bad that comes with it. 5/5 would highly recommend!

  • B Stewart

    JTK are awesome to work with! I purchased my very first investment property from JTK and they were great. With it being my first, they were very helpful and patient thoroughout the process. Amber even followed up after the purchase to see how things were progessing. I am certain we will do business again!!!