How to Calculate Down Payment
What is Down Payment?
The down payment is the upfront cash portion when buying a home. 20%+ eliminates PMI and results in lower monthly payments and total interest paid over the life of the loan.
Formula
Down payment = Purchase price × Down payment percentage; Loan amount = Purchase price − Down payment; PMI (if < 20%) ≈ Loan × 0.5%–1.5% annually
- P
- Purchase price (Currency)
- DP%
- Down payment percentage (Percentage (3–20% typical))
- PMI
- Private mortgage insurance (Percentage of loan (annual))
Step-by-Step Guide
- 1Down payment % = Cash / Purchase price × 100
- 2Loan = Purchase price − Down payment
- 3PMI required when down payment < 20% (US)
- 4PMI costs ~0.5–1.5% of loan annually
Worked Examples
Input
$400k home, 10% down
Result
Down $40k; Loan $360k; PMI ~$150/mo until 20% equity
Frequently Asked Questions
When does PMI end?
Request cancellation at 20% equity (via appraisal) or auto-cancellation at 22% equity. Timing depends on principal paydown + home appreciation. Can take 5–10 years.
Is 3% down enough?
Yes, but expensive. 3% down + PMI + closing costs = 5–6% of purchase price upfront. 10–20% down saves significantly on PMI and monthly payment.
Can I gift the down payment?
Yes. Gift money from family allowed. Lender requires letter stating no repayment expected. Can't be borrowed. Verify your lender's specific rules.
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