If you are preparing to buy a Oregon home, it’s time to start cutting your expenses and saving every penny that you can for a down payment.
When it comes to taking out a mortgage for your home, the bigger the down payment you can afford the better off you will be financially in the long run. A good rule to go by is to wait until you have a downpayment of at least 20% of the purchase price of the home.
Why is having a larger down payment better?
Here are some of the advantages:
Smaller Mortgage Payments
When you put down a significant amount on your home upfront, you will be able to pay smaller mortgage payments over years. This will make your monthly budget a lot easier to manage and give you more room to save and cover other expenses.
Also, this gives you room to accelerate your mortgage payments by adding on an extra payment or two every year so that you can get your mortgage paid off faster.
Saving Money on Interest
The more you pay in a down payment, the smaller the amount of your loan. This means that over the years you will pay thousands of dollars less in interest payments over the 15 or 30 years of your loan.
Better Interest Rate
Your lender will be likely to offer a lower interest rate when you have a larger down payment, as the loan-to-value ratio will be lower. This is because increasing the down payment decreases the amount of risk to the lender and they will feel more confident that you will be able to pay your full mortgage balance.
No Mortgage Insurance
Often, when you make a down payment that is smaller than 20%, most lenders will insist that you take out mortgage insurance. This protects the lender in the event that you are unable to pay the mortgage. Of course, the fees for mortgage insurance can cost you thousands of dollars per year.
These are just a few of the major advantages to saving up for a larger down payment on your Oregon home. To find out more about buying a property, please feel free to contact us today!