Reduce Your Monthly Mortgage Payments by Increasing Your Down Payment
The size of your mortgage payment is determined by two factors – the interest rate and how much you borrow.
The size of your mortgage payment is determined by two factors – the interest rate and how much you borrow. There is little you can do to reduce interest rate. However, you can reduce your mortgage payment by having a larger down payment. Using an automatic savings plan is the easiest way to build your down payment.
Here is a little chart showing the effect of having a larger down payment for a home costing $250,000.
Cost of the home |
Down payment |
Mortgage Amount |
Monthly payment |
$250,000 |
$25,000 |
$225,000 |
$1,497 |
$250,000 |
$50,000 |
$200,000 |
$1,331 |
$250,000 |
$65,000 |
$185,000 |
$1,231 |
$250,000 |
$75,000 |
$175,000 |
$1,164 |
$250,000 |
$100,000 |
$150,000 |
$ 998 |
(Assumes an interest rate of 7% and a 30-year amortization.)
You may already have some savings but establishing a disciplined savings habit can help you increase those savings, increase your down payment and reduce your monthly mortgage payment.
Here are some examples of how little you need to save monthly to add to those savings.
Increase your savings by |
Over 6 months |
Over 12 months |
Over 18 months |
Over 24 months |
Over 30 months |
Over 36 months |
$10,000 |
$1,656 |
$822 |
$544 |
$405 |
$321 |
$266 |
$15,000 |
$2,484 |
$1,233 |
$816 |
$607 |
$482 |
$399 |
$25,000 |
$4,141 |
$2,055 |
$1,360 |
$1,012 |
$804 |
$665 |
$35,000 |
$5,797 |
$2,876 |
$1,903 |
$1,417 |
$1,125 |
$930 |
$50,000 |
$8,281 |
$4,110 |
$2,719 |
$2,024 |
$1,607 |
$1,329 |
(Assumes a 3% earnings rate.)
Start Your Automatic Savings Today
There is no easier way to save than with an automatic savings plan. If you are already using direct deposit for your paycheck, have your financial institution transfer the amount each month. Here is an Automatic Transfer Authorization form to help you enroll. You can also have your employer deduct the amount each month and deposit into the account of your choice. Here is a Payroll Deduction Direct Deposit form.
If you are not already using direct deposit for your paycheck, here is a Payroll Direct Deposit form to help you get started.