15% or 20% down on first deal?

4 Replies

Buying a SFH with a conventional loan for 95k. I got two options from my loan officer.

1) 20% down (19k) , 4.875% interest, P&I = \$402, Cashflow = \$200

2) 15% down (14.2k), 4.875% interest, PMI = \$22, P&I = \$427, Cashflow = \$150

Which one makes more sense?

I'm assuming because you gave P and I of ~400 that you are giving us monthly and not yearly cash flow. What do you plan to do with the 5.8k difference? Are you accounting for the \$22 PMI in your \$150? Calculate the difference in cash flows and determine if you can do better than that by investing your 5.8k. If you can, then it's option #2.

Option 2!

@Theresa Reynolds , As Benjamin mentions, what is your \$5.8k doing for you? Having less in a deal is typically better, and your PMI is only costing you 4.5%. If you can do something with that 5,800 that earns more than 4.5%, you are netting ahead.

Alternatively, having that 5,800 even as reserves is very valuable on its own right, since things will come up, and sometimes things come up 2 weeks after closing.  Rarely, does it make more sense to put less down, assuming you can cash flow with a higher mortgage, and particularly with a mortgage where once it is in the property, you basically can't touch it.

@Benjamin Aaker