Paying more on a home down payment make a lot of sense. The bigger the down payment you make, the lower your monthly mortgage will be, and you will also increase your chances of building more equity in a short period. However, putting too much money can leave you financially stressed and leave your pockets empty.
Effect of Making a Higher Down Payment
Many borrowers usually ask if they should scrape a little more say 5% instead of 3%. However, this would not make that much of a difference in the monthly mortgage payment. When deciding on the amount of cash to use as down payment, make sure that you consider other effects on your financial plan.
According to a study’s 29% of homeowners borrowed from their retirement accounts to help pay for their mortgage down payments. However, the decision to do so is a risky one. In case you happen to lose your job you should find a way to repay the money before the next tax deadline; otherwise, it will be taxed as an ordinary income.
Many people who are first time home buyers say that they do not feel financially secure after purchasing their homes. For you to remain financially secure make sure that you do not use all your savings in the down payment.
Leave some of the savings for emergencies. To reduce surprises after acquiring your new home review the home first and request for repairs where necessary.