Post # 1
DH and I are nearing the final stretch of our homebuilding/home buying process. We are in a position to put 10% down, but are contemplating putting an additional 5% down to get to 15%. At this point, PMI is not a concern with the loan we have, so that is not a concern.
- Lower monthly payment by $200
- Thousands of dollars saved over the life of the 30 year loan
- Reducing our savings to $4,000 (we would work on building it back up quickly though, but it would take about 1 year to get back to its current balance)
- At this point, we only plan on staying in this home for 7-10 years–so is it worth the potential savings?
Other Relevant Information:
- The home is a new build and comes with a 1 year warranty on all appliances/fixtures (including water heater)
- Also comes with a 8 year structural warranty (electrical, roof, exterior, deck, etc)
Any thoughts bees?
Post # 5
@bmo88: if it were me, I’d just put the 15% down
Post # 6
I would put down as much as you can.
Post # 7
I’d put the least amount of cash down and keep the rest banked. If this isn’t a place you plan on living in long term, why wipe out your reserves? You won’t be keeping it for the life of the loan anyway.
Post # 8
@bmo88: With your information about the warranties (which was the first thing that popped into my head when I started reading), I would for sure put the 15% down.
Post # 9
@ItWasntMe: that is what we were thinking, but having a lower monthly payment would be nice as well. Ugh, decisions.
Post # 11
I know this isn’t what you are asking, but have you thought about the resale value of a new build in 7-10 years when all the warranties/appliances, etc. will need to be replaced and the home will no longer be new? I know there is no way to predict the market but consider that you will also have to pay agent commissions of 6% of the sale price + closing costs again on your second home, the appreciation value may not be so high. I would only put down 10% and see if you can invest the additional 5% in something that could bring you a greater return. You can always pay off more of the mortgage as you make your monthly payments.
Post # 12
We’re in a new home too with a 2/10 warranty, but you have to read the warranty information very carefully. Many of the appliances and fixtures that came with the house are pretty standard issue things, and we’ve already replaced all light fixtures in the dining room and both bathrooms as well as getting ready to redo the counters in the kitchen and baths. This house was already done, or we could have had the option to customize things and most definitely would have beforehand.
Our waranty states that the builder is only responsible for repairing any given item covered just once. We have a list of things he needs to see right now, so new doesn’t necessarily mean flawless.
Do you have furniture and window coverings and yard gear? There’s a lot of money needed the first year in any house.
Post # 13
@bmo88: i would definitely put down the extra 5% if you can afford it. over time, the savings on the interest alone is so worth it.
also, if you put down the extra 5%, your monthly would be lower. if you are prepared to still pay that extra $200/month, i would suggest either lowering your mortgage to a 20-25 year mortgage or take that $200/month and apply that to your mortgage over and above the regular payment. by overpaying or topping up your payments, the amount you pay ($200 in this case), will come straight off of the principal, therefore, lowering your interest amounts by a bit month after month and increasing the equity.
as you know, the first few years of your mortgage, you are mainly just paying off the interest. this way, you will see quicker movement on your principal.
i did both of these on my first house (doubled my mortgage payment) and it was amazing how quickly the ratio of payments changed with my interest:principal.
Post # 14
@bmo88: I would advise something in the middle, because it’s true 4K isn’t much if it’s all that stays into your savings. I don’t know how real estate works but in Québec when you buy a house you have to calculate about 5K into additional fees, such as welcome taxes, the legal papers, not mentioning you’ll probably have a lot of “I didn’t think about buying this, paying for that, etc.” I wouldn’t buy if I didn’t have at least 5K in the bank and it would probably not be a comfortable amount.
Then I would also bring the downpayment up to 15% and that’s what we’re planning to do as well. Many people go with the unexpensive solution of 5% or 10% and they end up paying expensive mortgage each month just for the house. Then they don’t have money left to do anything. It’s not what FI and I want, we’re looking for life quality, savings and money we can spend if we want. Using 15% would allow you this extra money into your bank each month for 7 to 10 years ? You’ll save 16 800$ to 24 000$ just with the 200$ you’ll have extra in your budget each month. You’ll pay less in interest fees (and you might even negociate your interest rates to be lower).
So my answer would be to wait just a little bit to save a few additional K for emergencies and fees linked to the house purchase, and when you feel you have enough, put the 15%.
Post # 15
Where I live, they recommend 20 percent down. I’d never put any less than that because you have to pay “high risk” insurance fees if you don’t. I’d rather wait and save some extra money.
Post # 16
$4000 isn’t much for your first home as there is so much stuff to buy. If you’re moving from a house already, even if you are just renting you will likely be more prepared than if you were renting an apartment, but there are probably still things you need.
If you make extra payments you won’t be out that much money. I’d do a smaller downpayment, and instead of rebuilding savings you can just put that money to your mortgage assuming your lender allows that.
To be honest though, I would want to save up more. DH and I put 20% down to avoid CMHC and had extra savings.