Down payment calculator

Every down payment answer has a second half. Putting $80,000 down on a $400,000 house is the same statement as arranging a $320,000 loan, and the loan is the number the rest of the process runs on: the payment, the interest, the affordability test.

That is why this calculator prints both. A deposit figure without its loan is half an answer, and the half that is missing is the one with the monthly cost in it.

Twenty percent is not a rule, it is the level at which mortgage insurance usually stops being required, because it puts the loan to value at 80 percent. Below it, the loan is still available, with an extra monthly cost attached.

The second example shows the trade. Ten percent down on $350,000 means $35,000 of cash rather than the $350000 \times 0.20 = 70000$ a 20 percent deposit would need, and a $315,000 loan at 90 percent LTV. Less cash now, more borrowing and probably mortgage insurance until the ratio comes down. The PMI calculator prices that side.

Closing costs, prepaid tax and insurance, and moving costs all arrive around the same date and none of them are in this formula. Planning for exactly the down payment leaves those to be found somewhere else in the same week.

A useful habit is to size the cash target as the down payment plus a separate closing cost estimate, then check the whole housing payment against income with the mortgage affordability calculator before committing to a price.

One price, one percentage, two amounts. It sets the starting loan for every later mortgage calculation and the starting equity in the property. How down payments work covers what each level of deposit changes, and private mortgage insurance covers the cost of going below 20 percent. This is educational material, not financial advice.