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How Saving $20K on PMI with a Bigger Mortgage Down Payment Probably Costs You Over $250K
30Y in 30D • Y17. It’s crazy how high the actual — but avoidable — cost is of following advice from real estate pundits. Larger down payments don’t always pay off.
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I had a late night phone call a couple weeks ago with a friend that I’ve known forever.
My friend bought a house recently on the East Coast — his first one — and he was catching me up on how his first year of living there has gone.
One of the things he mentioned was that he had made a larger than planned down payment on the house of 20% in order to not have to purchase PMI (private mortgage insurance.) Everyone had advised him to do this if he could swing the extra down payment, and he felt as though he had made a savvy move in following their advice.
After we got off the phone, I thought more about what he had told me.
First off, pundits always, always, always recommend making a 20% down payment as a savvy financial thing to do if you have the money to do it. So my friend getting that advice — and then following it — wasn’t a big surprise.
But I kept wondering whether anyone had actually run the numbers in a thoughtful, “what-if” kind of way to see if it really did make sense.
And yes, even though this advice is so well-accepted that it’s considered common wisdom, I was still…
