🌱 How much should I put down on a house?

Deciding whether to buy a home now with private mortgage insurance (PMI) or wait until you have a full 20% down payment is a tricky financial balance. In a rising housing market, the property appreciation you miss by waiting often eclipses the direct cost of PMI premiums. This calculator compares the price of paying PMI today against the added cost of buying a more expensive home later.

The CFPB defines PMI as insurance required for conventional loans with less than 20% down. It protects the lender (not you) if you stop making payments. PMI is an added monthly expense that increases your total loan cost. The CFPB notes that a 20% down payment avoids it completely and often secures a better interest rate.

This calculator simplifies reality by assuming you pay PMI for the entire waiting period. In practice, PMI typically cancels once you reach 20% equity through payments or appreciation. We also exclude closing costs, credit score impacts on pricing, and government loan alternatives that require less cash upfront.

Why is PMI often cheaper than it sounds? When home prices rise by 4% to 6% annually, the house you want gets more expensive every month. The massive cost of that skipped appreciation usually outweighs the temporary sting of PMI premiums.

However, keeping your cash wins in a flat or falling market. Continuing to save is also smarter if you receive high PMI quotes or only have a small remaining gap to reach your target down payment. Adjust the appreciation rate to see how market conditions change the verdict.

For further related reading, check out:

• What is private mortgage insurance? | Consumer Financial Protection Bureau
• What kind of down payment do I need? How does the amount of down payment I make affect the terms of my mortgage loan? | Consumer Financial Protection Bureau