10% vs 20% Down Payment: Is the Extra Savings Worth It?
The conventional wisdom says "put 20% down to avoid PMI" — but is waiting to save that extra 10% always the right move? Every month you wait is a month of rent paid, potential home appreciation missed, and equity not being built. The 20% advantage is real but so is the opportunity cost of waiting. Use the calculator to compare both scenarios for your target home price.
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With 10% down at a 7% rate, you reach 20% equity (triggering PMI removal) in roughly 8–9 years through normal amortization. If your home appreciates, you could request a PMI removal appraisal sooner. Making extra principal payments can also accelerate this timeline.
What is the total PMI cost with 10% down?
PMI typically costs 0.5–1.5% of the loan amount per year. On a $360,000 loan at 0.8%, that's about $240/month. Over 9 years before automatic cancellation, total PMI paid could be $25,920 — less than the $40,000 difference between 10% and 20% down.
Should I put 10% down and invest the rest?
This is a real debate. If you put 10% down and invest the $40,000 difference in a diversified portfolio returning 7%+ annually, over 9 years that could grow to $73,000+. The PMI cost over 9 years might be $25,000. Mathematically, investing can win — but it requires discipline and tolerance for market volatility.
Is there a middle ground between 10% and 20% down?
Yes — 15% down gets you into a better PMI bracket (lower rate), reduces your loan balance, and gets you to 20% equity faster than 10% down. It's often a good compromise if you have the savings but don't want to fully drain reserves for 20%.
Does down payment affect my mortgage rate?
Yes — Fannie Mae's LLPA grid adjusts rates based on LTV. At 90% LTV (10% down) vs 80% LTV (20% down) with the same credit score, the rate adjustment is typically +0.25% to +0.5%. This compounds the PMI cost, making 10% down moderately more expensive in two ways.