Comments on: Does A Large Down Payment Save Money In The Long Run?

By: Joseph

Joseph — Sat, 03 Mar 2012 22:46:35 +0000

Scott,

You’re absolutely right, I didn’t exactly compute that correctly. Thanks for pointing that out. Now, the idea behind this post I still think is worth considering — in that it might not always make sense to pay the maximum amount down you can afford if you have the option to pay less than the maximum. It’s all personal and a decision each person will have to strongly consider before making a final decision.

Thanks for the comment!

By: Scott

Scott — Sat, 03 Mar 2012 15:17:53 +0000

Your spreadsheet has a flaw: you subtracted your extra down payment difference of $7,500 from the “Difference in Interest Paid” which you assumed made your interest savings only $2,065.84. This is a mistake.

What you need to do is look at total down + total principal + total interest payments over the life of the loan.

In both cases of 5% and 10% down: total down + total mortgage principal = purchase price = $150,000.

However with 5% down you pay $181,750.90 in total interest.
Whereas with 10% down you only pay $172,185.06.

That is to say, the only true variable is the loan expense, AKA interest, so you should leave the “Difference in Interest Paid” column alone – this is your total savings $9,565.84.

By: Matthew C. Kriner

Matthew C. Kriner — Tue, 23 Feb 2010 16:21:31 +0000

Great comment about private money

By: Jo Jo Sands

Jo Jo Sands — Thu, 24 Dec 2009 12:02:47 +0000

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By: Joseph

Joseph — Wed, 04 Feb 2009 05:31:32 +0000

To be honest with you Blake I didn’t actually figure in the time value of money. I’m actually curious as to how the numbers would work out if I were to do so. Interesting.

By: Blake

Blake — Fri, 30 Jan 2009 14:04:04 +0000

Very interesting Joe. I'm assuming the time value of money also plays a role here? With a fixed payment over the life of the loan, the real value of that payment amount will gradually erode as inflation works its magic. Blakes last blog post..The Power of Measurement

By: Kristy @ Master Your Card

Kristy @ Master Your Card — Fri, 30 Jan 2009 05:57:29 +0000

I haven't personally looked into the prospect of buying a house, so I'm not as up on mortgages as I should be. I could talk home equity until the cows come home, but mortgage is a different animal entirely. That said, I don't really see how your numbers reflect more savings in 5% as opposed to 10%. The more money you put down, the less interest you're paying on principal. Roughly translated, that means more savings for you. So, help me out here. How are you figuring that you're saving more by putting down less? Kristy @ Master Your Cards last blog post..20 Ways I Plan to Keep My New Year’s Resolutions