If you haven’t bought your first home I suggest you start putting your money away right now because it’s always a good idea to put down a large down payment. Here are a few great reasons why it’s your best option in most cases.
Bleeding you dry with interest
The banks need to make money and they do it by adding a massive amount of interest to your mortgage repayments. For the first half of your mortgage you’re lucky if you’re paying hardly anything towards the price of your home. It’s quite a substantial amount of money and most people write it off as something that must be done. Put more money down in the beginning and over the life of your mortgage you’ll end up paying a lot less interest which is only a good thing.
A more lavish lifestyle
Do you like to fly to the beach a few times per year so you can top up your tan? Maybe you just like to eat out at nice restaurants a few times per week. When you’re still young it’s worth it to dig in and come up with a larger down payment when buying your home because it means your mortgage repayments will be smaller. You will have more money in your pocket every month and every dollar you earn won’t be getting pumped into your home.
You can sell if you have to
When you don’t put down a large down payment you’re in very risky waters should you ever decide to sell your home. I’m sure you know houses don’t always go up in price and sometimes they fall sharply. If you don’t have enough money invested in your home when it’s time to sell you might not even be able to make enough money to pay back the bank. This won’t matter too much if you don’t plan on selling your new home, but you never know what might happen in the future.
The light at the end of the tunnel
The first few years are great when you buy a new home because you’re just happy you have a place to call your own. It doesn’t take long for reality to kick in and you realize you’ll be making big monthly payments for the majority of your life. When you put down more money in the beginning the light at the end of the tunnel isn’t as far away. You’ll still have many unhappy years of handing over your hard-earned money, but at least it will be over a lot quicker than usual.
You don’t need the money
In some cases it’s not a good idea to put down too much money in the beginning because what happens when you need it? You won’t be able to take it out again once it’s in, but this is a good thing if you have a simple life and you don’t have any other need for a large chunk of money. When you have credit card debt people say you should pay off your debt instead of saving your money because you’ll actually come out on top. It’s the same situation here and if you invest in a bigger down payment you’ll come out on top, provided you don’t need it of course.
Leslie Kramer, the author of this post, is a freelance blogger, who is currently writing for Commercial space, one of the leading real estate professionals. Leslie is a movie buff and likes to for trekking and camping with her friends during weekends.