Financing

Down Payment Strategy.

5%, 10%, 15%, or 20% — see what each level does to your monthly cost, PMI duration, and total cash out of pocket over your hold period.

Live tool 4 tiersPMI durationHold-period totals
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The home

Home price
$
Mortgage rate
%
Term
yr

Other monthly costs

Property tax (annual)
$
Insurance + HOA + maint (monthly)
$

Hold period

Years you'll keep the loan
yr

Four down payment scenarios

5% down $3,318 PMI: ~$252/mo, removes month 130
10% down $3,150 PMI: ~$239/mo, removes month 78
15% down $2,983 PMI: ~$226/mo, removes month 30
20% down $2,725 No PMI

Total cost over 10 years

5% down — total housing cost$418,160
10% down — total housing cost$420,500
15% down — total housing cost$422,375
20% down — total housing cost$391,500

20% down wins over a 10-year hold — primarily because the larger down payment eliminates PMI entirely. The monthly difference accumulates substantially.

How this is calculated

For each tier: loan amount = price × (1 − down %), monthly P&I from standard amortization at your rate and term, monthly PMI = loan × 0.75% / 12 (when down < 20%), removed when scheduled balance reaches 78% of price.

Total housing cost includes down payment + (monthly cost × hold months). Tax and other costs are constant across tiers.

This calculator does not account for opportunity cost of the larger down payment — money put down isn't earning a market return. The 20% scenario looks cheapest in cash terms but ties up more capital.

Read the full methodology →

Down payment strategy

More down isn't always better. The right answer depends on your hold period.

Conventional wisdom says "put 20% down to avoid PMI." That's right when your hold period is long. It's not always right when capital is tight, when you have higher-yielding alternatives, or when your hold period is short.

What changes at each tier

  • 5% down. Lowest cash to close. Highest loan amount. Highest monthly P&I. PMI runs long — typically 11+ years to the 78% threshold under standard amortization. Best for buyers with limited liquidity and confidence they'll stay or refinance.
  • 10% down. Cash sweet spot for many buyers. PMI runs ~7–8 years. Loan amount sized to qualify cleanly under most underwriting. Good middle path.
  • 15% down. Substantially shorter PMI period (~3–4 years to threshold). Some lenders offer slightly better rates above 15% LTV. Underrated tier for buyers who can swing it.
  • 20% down. No PMI ever. Lowest monthly cost. Largest cash commitment. Lowest opportunity cost recovery — that 20% is now sitting in real estate rather than equity markets.

The PMI math, simplified

On a $425K home at 6.75% with 0.75% PMI: 5% down adds ~$252/mo of PMI for ~130 months ($32,800 total). 10% down adds ~$239/mo for ~78 months ($18,600). 15% down adds ~$226/mo for ~30 months ($6,800). 20% down: zero. The PMI premium isn't huge in any single month — but it accumulates.

The opportunity cost wrinkle

Every dollar above the 5% minimum is a dollar that could be invested elsewhere. If you can earn 7% in equity markets, the opportunity cost on the extra 15% down ($63,750 on a $425K home) is roughly $4,460/year — comparable to PMI cost on the smaller down. This calculator doesn't model opportunity cost; if it did, the 5% and 20% scenarios would land closer than they appear here.

Liquidity matters

The single biggest mistake in down-payment optimization is buying a 20%-down home and ending up with two months of liquid reserves. Reserves protect against job loss, medical events, and major repairs — events that are far more likely to derail homeownership than PMI cost. A 10% down purchase with 8 months of reserves is structurally safer than a 20% down purchase with 2 months of reserves.

A useful sequence: first determine how much liquid reserve you need post-closing (target: 6 months of full housing cost). Whatever's left goes to down payment. If the math works at 10% down with strong reserves, that's usually the right answer — even if 20% would work mechanically.
FAQ

Common questions about down payment strategy.

Why isn't 20% always the right answer?
Because money put down can't be invested elsewhere, and PMI ends. Over a long hold, more down does win in cash terms — but the gap shrinks once you account for opportunity cost on the extra capital. For shorter holds (under 5 years), smaller down often wins because PMI doesn't run long enough to matter.
Does the calculator account for opportunity cost?
No — it shows pure cash out of pocket. The 20% scenario looks more favorable here than it would if you also modeled what the extra down payment would have earned in a brokerage account. The Rent vs Buy calculator does include opportunity cost for that broader comparison.
What about loan-level pricing adjustments?
Conventional rates can vary slightly with LTV — some lenders price 5% down loans at 0.125–0.25 percentage points above 20% down loans. The calculator uses one rate for all tiers; if your lender quotes different rates by LTV, run separate scenarios.
Should I just put 3% down with a Conventional loan?
Possible with strong credit. The math is similar to 5% down — PMI runs slightly longer, loan amount is slightly larger. The economic argument is the same: low down preserves cash and capital for other uses.
How does this interact with FHA?
FHA's monthly MIP is 0.55% for life if down is under 10%, longer than Conventional PMI. For long holds, FHA almost always loses to Conventional with similar down. Run FHA vs Conventional separately if FHA is your only option due to credit.
Can I split the difference and pay extra principal monthly?
Yes. Putting 10% down and adding $200/month in extra principal is functionally similar to putting 12.5% down — and keeps the cash flexible until you commit it. Most loans allow extra principal payments without penalty.
Keep going

Related calculators.

Calculator

PMI Calculator

Detail on PMI cost, removal date, and total — by credit tier.

Open Calculator

Cash to Close

How down payment + closing costs combine into the wire-day number.

Open Calculator

FHA vs Conventional

If your credit pushes you toward FHA, run the loan-type comparison.

Open
Decision tool

Pair this with a reserves check.

More down isn't better if it leaves you with two months of reserves. The Affordability calculator surfaces the trade-off between down payment and emergency cushion.

Open Affordability PMI calculator