A mortgage down payment is the upfront cash you pay towards the purchase price of a home when you take out a mortgage. It's the difference between the home's purchase price and the amount you borrow from the lender. For instance, if a home costs $300,000 and you make a $60,000 down payment, you will borrow $240,000.
Why is the down payment important?
Reduces Loan Amount: A larger down payment means a smaller loan, leading to lower monthly mortgage payments and less interest paid over the life of the loan.
PMI (Private Mortgage Insurance): Many lenders require PMI if your down payment is less than 20% of the home's purchase price. PMI protects the lender in case you default on the loan. By putting down 20% or more, you can often avoid this extra monthly cost.
Loan Approval: A substantial down payment demonstrates financial stability and reduces the lender's risk, potentially making it easier to get approved for a mortgage and securing better interest rates.
Equity: Your down payment immediately builds equity in your home, which is the difference between the home's value and the amount you owe on the mortgage.
How to Calculate Your Down Payment:
The calculation is straightforward. You determine the desired percentage of the home's price you wish to pay upfront, and then multiply that percentage by the home's total purchase price.
Formula:
Down Payment Amount = Home Purchase Price × (Desired Down Payment Percentage / 100)
Example:
If you are looking to buy a home priced at $400,000 and you want to make a 15% down payment, the calculation would be:
This means you would need approximately $60,000 in cash for your down payment. The remaining amount to be financed through the mortgage would be $400,000 – $60,000 = $340,000.
Using this calculator, you can easily estimate your required down payment based on the home's price and your desired contribution.
function calculateDownPayment() {
var homePriceInput = document.getElementById("homePrice");
var desiredDownPaymentPercentInput = document.getElementById("desiredDownPaymentPercent");
var resultDiv = document.getElementById("result");
var downPaymentAmountDisplay = document.getElementById("downPaymentAmount");
var downPaymentPercentageDisplay = document.getElementById("downPaymentPercentageDisplay");
var homePrice = parseFloat(homePriceInput.value);
var desiredDownPaymentPercent = parseFloat(desiredDownPaymentPercentInput.value);
if (isNaN(homePrice) || isNaN(desiredDownPaymentPercent) || homePrice <= 0 || desiredDownPaymentPercent 100) {
alert("Please enter valid numbers for Home Purchase Price and Desired Down Payment Percentage (0-100).");
resultDiv.style.display = 'none';
return;
}
var downPaymentAmount = homePrice * (desiredDownPaymentPercent / 100);
downPaymentAmountDisplay.textContent = "$" + downPaymentAmount.toLocaleString('en-US', { minimumFractionDigits: 2, maximumFractionDigits: 2 });
downPaymentPercentageDisplay.textContent = "(" + desiredDownPaymentPercent.toFixed(2) + "% of Home Price)";
resultDiv.style.display = 'block';
}