The traditional down payment for a home these days is 20 percent. However, if you have the financial means to do so, you may consider making a bigger down payment. Here are a few advantages of making a large down payment on a home.
You’ll Have Smaller Mortgage Payments
The most obvious advantage of putting more money down are smaller mortgage monthly mortgage payments. After all, the less money you borrow, the less money you will have to pay back. If you have smaller mortgage payments, you will have extra money to put towards your emergency savings, retirement and other important things.
You’ll Pay Interest
Charging interest is how lending companies make a profit. However, that does not mean you want to pay through the roof in interest. If you make a bigger down payment on a house, you will have to borrow less and ultimately owe less interest. By saving thousands of dollars on interest over the years, you will have more money for things you want.
You May Get Better Loan Terms
Mortgage lenders tend to favor people who make large down payments on a home. If the lender has to foreclose the home in the future, they may likely be able to sell the property for more than the loan amount. The lender also assumes that you will be more likely to make your monthly mortgage payments because making a large down payment is a large financial investment.
If your credit rating is less than stellar right now, offering a bigger down payment may give you a leg up. Even if your credit rating is not very high, the lender may still offer you a loan if you make a larger down payment.
You’ll Have a Better Chance of Outbidding Other Buyers
It is likely that you won’t be the only person making an offer on a certain home. Offering the highest bid on the home is not the only way to entice the seller. If the seller knows that you made a large down payment, he or she will feel confident that you will close the deal. Therefore, the seller may accept your offer.