How Much Do You Need for a Home Down Payment?
According to the 2021 census, up to 67% of Australians are homeowners. If you’re a first-time home buyer, making your first purchase can feel overwhelming. How can you decide on a home down payment?
If you’re struggling to decide on a house down payment, we’re here to help. Read on to learn more about your down payment on home properties.
Making a High Home Down Payment
One common tactic is to make your down payment a high percentage. Some will pay as much as 20% of the home’s value. Here are the ups and downs of this strategy.
Pros
Making a high down payment can lead to a lower mortgage rate. As you owe less on the home, you won’t need to pay as much in the future. Due to this, your monthly rates are lower.
Your interest rate will also improve as a result of this higher payment. Additionally, you’ll have a competitive stance over other buyers. If your down payment is higher than theirs, the homeowner may prefer to sell to you.
Cons
One of the main drawbacks of a high down payment is how long it takes to save up. If you’re buying a house, you’ll need to wait to save up for this down payment for months or years.
Furthermore, you’ll have more financial risk. Getting your money back from your mortgage is difficult! A high down payment means more money is sunk into this fund.
Making a Small House Down Payment
Did you know that you can purchase a house with no down payment? If you’re wondering how much you need for a home down payment, the answer could be none! Decide if a down payment is right for your finances.
If a high down payment seems unreachable, a smaller fund is often preferable. Here are the pros and cons of a smaller house down payment.
Pros
The first pro is that you can purchase your house much sooner. You won’t need to save for as long and will have money left over.
Those funds could then go into repairing or restoring the home. Any costly renovations or improvements will have funds from your smaller down payment.
Finally, it’s easier to get a loan for smaller amounts. You can visit sites like huntergalloway.com.au to look into financing your house down payment.
Cons
The primary con of a small down payment is higher interest rates. You’ll owe more on the home’s full value, causing the interest to continue compounding on a higher amount.
A first-time home buyer making a smaller down payment may also struggle against the competition. If another homeowner is paying twice your payment, the seller may choose to go for this client instead.
Buying Your House
Choosing a home down payment should come from analyzing your finances and funds. Decide how high your down payment should be if you choose to make one before making offers. Doing so can help you avoid overspending.
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