Want to see how long it will take you to save up for a down payment on a home?
This calculator will estimate how long you need to save to reach your down payment savings goal. Enter the current house price, the down payment percent you want to pay, an estimate of rate of appreciation for local real esate, how much you already have set aside, how frequently you plan to add deposits, the amount of your deposits, and the interest rate you expect to earn on your savings.
The calculator will automatically update the results when you change any of the input fields. Home price changes, interest earned & total savings are compounded each time a deposit is made. We also offer a calculator that converts rent payments into equivalent mortgage payments.
For your convenience we list current Cambridge mortgage rates to help homebuyers estimate their monthly payments & find local lenders.
The following table shows current 30-year mortgage rates available in Cambridge. You can use the menus to select other loan durations, alter the loan amount, or change your location.
If you are not yet a homeowner but wish to be one someday, you are going to have to consider a down payment. Though there are certainly some mortgage options that will allow you to get into them without a down payment (like the VA loan, which caters to veterans), these are much more the exceptional cases than the general rule for most home buyers. Workers in influential technology companies with valuable stock options might also be able to bypass saving for a down payment, but this is guide which applies to most of the country.
This article is meant to help you start thinking more clearly about a mortgage down payment: how much you might need, how it affects your mortgage and more. As with all financial decisions, please consult a trusted financial advisor before making any serious move forward.
As there are different types of mortgage options, there are also a range of required down payment amounts to accompany them. Expect to pay from 0-20%, or possibly even more.
Traditionally, 20% was the goal for a mortgage’s down payment but that has shifted some in recent years as lenders and government sponsors get more creative with their offers.
If you are arranging your mortgage through a government entity, such as with a VA or an FHA loan, you could reduce your needed down payment to 3.5% with an FHA, or even zero-down if you are veteran, qualified for the VA loan.
Conventional mortgages usually require a minimum of 5% down, but it will range and vary by provider and the options offered for your specific qualifications.
Freddie Mac now has Home Possible, and Fannie Mae offers HomeReady which are programs created in 2018 with low down payment requirements – only 3-5%.
Factoring in all of the various loan types and programs available, an averaged median cost for a mortgage down payment would currently fall between 5-10% of the full mortgage amount. The optimum down payment is still 20% or more, but lower rates are very common today.
While paying less money to get into a mortgage certainly sounds attractive, it is important to understand how the decision can affect other related aspects of your mortgage's costs.
Lenders have also become pretty creative in the way they can structure loans, giving more opportunity to folks who have less money up-front to get into a home. One such option, designed to assist cash-strapped borrowers, was the piggyback mortgage of the mid-late 2000's, still used occasionally today.
Those who pay at least 20% on a home do not require PMI, but homebuyers using a conventional mortgage with a loan-to-value (LTV) above 80% are usually required to pay PMI until the loan balance falls to 78%.
PMI typically costs from 0.35% to 0.78% of the loan balance per year. The annual payment amount is divided by 12 and this pro-rated amount is automatically added to your monthly home loan payment.
| Home Price | Down Payment | LTV | Loan Amount | Insurance Rate | Annual Premium | Monthly Premium |
|---|---|---|---|---|---|---|
| $400,000 | $20,000 | 95% | $380,000 | 0.78% | $2,964 | $247.00 |
| $400,000 | $40,000 | 90% | $360,000 | 0.52% | $1,872 | $156.00 |
| $400,000 | $60,000 | 85% | $340,000 | 0.35% | $1,190 | $99.16 |
| $400,000 | $80,000 | 80% | $320,000 | not required | $0 | $0 |
Here are a range of down-payment amounts for median homes across the country. The average amount financed is 90%, so the average down-payment on a median existing home is $39,180 while the average down-payment on a median new home is $40,930. Closing costs are not included in these figures.
| October 2023 Price | 3% | 5% | 10% | 15% | 20% | |
|---|---|---|---|---|---|---|
| Median Existing Home | $391,800 | $11,754 | $19,590 | $39,180 | $58,770 | $78,360 |
| Median Existing Single-Family Home | $396,100 | $11,883 | $19,805 | $39,610 | $59,415 | $79,220 |
| Median Existing Condos & Co-ops | $356,000 | $10,950 | $17,800 |
$35,600 | $53,400 | $71,200 |
| Median Existing West Home | $602,200 | $18,060 | $30,110 | $60,220 | $90,330 | $120,440 |
| Median Existing Northeast Home | $439,200 | $13,176 | $21,960 | $43,920 | $65,880 | $87,840 |
| Median Existing South Home | $357,700 | $10,731 | $17,885 | $35,770 | $53,655 | $71,540 |
| Median Existing Midwest Home | $285,100 | $8,553 | $14,255 | $28,510 | $42,765 | $57,020 |
| Median New Home * | $409,300 | $12,279 | $20,465 | $40,930 | $61,395 | $81,860 |
| Average New Home * | $487,000 | $14,610 | $24,350 | $48,700 | $73,050 | $97,400 |
Sources: * Census.gov, all others NAR
Rules of thumb for quickly estimating down-payment amounts:
The above rules of thumb will skew slightly low because they do not include closing costs, which typically run between 2% to 5% of the home purchase price.
The more you can afford to put down on a house the less capital will accumulate interest. Further, outside of saving on interest payments, there is another benefit for putting down at least 20%.
For a standard conforming mortgage, it is ideal to put at least 20% down on the loan. Loans which have less than 20% down-payment have a loan-to-value (LTV) above 80% & are required to carry property mortgage insurance (PMI), which is an additional expense paid by the home buyer to insure the lender will get paid in case the homeowner can not make payments. These insurance payments must be made until the LTV falls below 80% & are automatically removed when the LTV falls to 78%.
PMI ranges from 0.3% to 1.5% of the initial loan amount, with the consumer's credit score & the down-payment amount factoring into the rate.
If you do not have the 20% down needed to avoid PMI on a second mortgage, lenders have devised a new loan structure to help you get some of these benefits: the piggyback mortgage.
Buyers may apply for a second mortgage to help pay part of their down-payment & remove PMI insurance requirements. This loan format is often referred to as a "piggyback loan," where a borrower pays 10% down on the home & uses the second mortgage for the next 10% down to avoid PMI payments.
Where a typical mortgage might be seen as 20-80, with 20% down and 80% financed, a piggyback mortgage splits the down payment into pre- and post- fees, structuring the same amount as 10-80-10 (or maybe 5-80-15, or 15-80-5), with only 10% (or 5% or 15%) needed down, then the additional percentage financed as a different part of the same loan, but a different loan as well…usually at a higher interest rate.
So, you would be making two mortgage payments with a piggyback – one for the mortgage, and one for the down payment – the 80% and that 10% at the end of the equation. But you would need less cash up-front to close.
Losing the costs of PMI will need to be offset by the strategy of a piggyback – maybe by paying off the smaller loan quickly, or this type of loan will not make long-term sense.
While it can help you to get into a bigger home with less money up-front, if you are not careful, a piggyback can actually make you pay MORE for the home in time, than other options would…because the inflated interest rate on the second mortgage could be significant, increasing your bottom line spend for the property.
Should you piggyback? Maybe so, if these are true:
Here is an illustrative chart of estimated monthly PMI costs based on a flat rate of 0.55%. Please note that as your down payment goes up the PMI rate is lower, so the savings on PMI by making a larger downpayment are more subtantial. When you put 20% down PMI is not required.
| October 2023 Price | 3% down | 5% down | 10% down | 15% down | 20% down | |
|---|---|---|---|---|---|---|
| Median Existing Home | $391,800 | $174.19 | $170.60 | $161.20 | $152.64 | $0 |
| Median Existing Single-Family Home | $396,100 | $176.10 | $172.47 | $163.39 | $154.31 | $0 |
| Median Existing Condos & Co-ops | $356,000 | $158.15 | $155.01 | $146.85 | $138.69 | $0 |
| Median Existing West Home | $602,200 | $267.73 | $262.21 | $248.41 | $234.61 | $0 |
| Median Existing Northeast Home | $439,200 | $195.26 | $191.24 | $181.17 | $171.11 | $0 |
| Median Existing South Home | $357,700 | $159.03 | $155.75 | $147.55 | $139.35 | $0 |
| Median Existing Midwest Home | $285,100 | $126.75 | $124.14 | $117.60 | $111.07 | $0 |
| Median New Home * | $409,300 | $181.97 | $178.22 | $168.84 | $159.46 | $0 |
| Average New Home * | $487,000 | $216.51 | $212.05 | $200.89 | $189.73 | $0 |
Sources: * Census.gov, all others NAR
Years to build 22% equity (& remove PMI payments) for a 30 year conforming loan, based on down-payment amount & loan interest rate.
| Down-payment | 0% | 5% | 10% | 15% |
|---|---|---|---|---|
| APR | Years of PMI payments | |||
| 3% | 8.5 | 7.5 | 6 | 4 |
| 4% | 9.5 | 8.5 | 6.5 | 4.5 |
| 5% | 10.5 | 9.5 | 7.5 | 5 |
| 6% | 11.5 | 10.5 | 8.5 | 5.5 |
| 7% | 12.5 | 11.5 | 9 | 6.5 |
| 8% | 13.5 | 12 | 10 | 7 |
| 9% | 14.5 | 13.5 | 11 | 8 |
| 10% | 15.5 | 14.5 | 12 | 9 |
Years to build 22% equity (& remove PMI payments) for a 15 year conforming loan, based on down-payment amount & loan interest rate.
| Down-payment | 0% | 5% | 10% | 15% |
|---|---|---|---|---|
| APR | Years of PMI payments | |||
| 3% | 3.5 | 3 | 2.5 | 1 |
| 4% | 4 | 3.5 | 2.5 | 1.5 |
| 5% | 4 | 3.5 | 2.5 | 1.5 |
| 6% | 4 | 4 | 3 | 2 |
| 7% | 4.5 | 4 | 3.5 | 2 |
| 8% | 5 | 4.5 | 3.5 | 2.5 |
| 9% | 5 | 4.5 | 3.5 | 2.5 |
| 10% | 5 | 5 | 3.5 | 2.5 |
If the value of your home increases significantly during the loan, you may be able to get PMI removed quicker than shown in the above charts if the bank recognizes the increased value of your home. To do so, you will have to contact your lender when your LTV is below 80% to request the removal of PMI.
It is possible to buy a home with little or no money down, however the ability to do so depends on how tight lending standards are, the background of the applicant & the credit quality of the applicant. Some programs are available exclusively to military members, low income communities & first time home buyers.
Typical banks want at least a 3% down-payment & PMI to insure loans. Loans with a 3% down-payment are called Conventional 97 mortgages.
Fannie Mae has approved mortgage lenders to offer a HomeReady lending program that only requires a 3% down-payment. The program can be used by first-time & repeat home buyers to finance or refinance a home in lower-income & minority-heavy areas. The minimum credit score for HomeReady loan qualification is 620.
Freddie Mac offers 2 low down-payment mortgage options.
Their Home Possible program requires a 5% down-payment & can be used on most types of property using a variety of fixed & adjustable rate loan terms.
Home Possible Advantage requires a 3% down-payment, but can allow up to 105% financing when combined with a second mortgage. These can only be applied to fixed-rate mortgages on primary residences.
Some federal loan programs may come with the ability to buy a home with little to no money down.
All-cash buyers represent a small segment of the overall home buying market.
Traditionally most home buyers in the United States have financed their home purchases. According to the National Association of Realtors, in 2016, 88% of home buyers used mortgage financing.
Before many cash-rich buyers from China & other countries purchased escape hatch homes the percent of buyers leveraging financing has historically ranged between 92% & 93%.
A big part of what controls the average down-payment largely comes down to what loan programs are popular at the time. For example, in 2013 the FHA significantly increased fees associated with their loan programs, which in turn has made conventional mortgage loans relatively more attractive & increased the market-share of conventional loans.
Here is the breakdown of buyers by financing type.
| Mortgage Type | % of buyers in 2016 |
|---|---|
| fixed | 92% |
| adjustable | 8% |
| conventional | 59% |
| FHA | 24% |
| VA | 12% |
| Generation | Used Financing | Down-payment | Amount Financed |
|---|---|---|---|
| Gen Y | 98% | 7% | 93% |
| Gen X | 96% | 10% | 90% |
| Baby Boomers | 76% | 17% | 83% |
| Silent Generation | 58% | 22% | 78% |
| Overall | 88% | 10% | 90% |
While a 20% down-payment is a popular benchmark, some borrowers can borrow up to 97% of a home's value with property mortgage insurance, while others leverage federal programs with no down-payment requirements. One of the primary determinants of the percent financed is how old the home buyer is. Here are 2016 home financing statistics based on the age of the home buyer.
| All Buyers | < 37 | 37 - 51 | 52 - 61 | 62 to 70 | 71 to 91 | |
|---|---|---|---|---|---|---|
| Less than 50% | 9% | 6% | 5% | 10% | 19% | 20% |
| 50% to 59% | 4 | 1 | 4 | 3 | 7 | 11 |
| 60% to 69% | 4 | 2 | 4 | 5 | 10 | 11 |
| 70% to 79% | 11 | 8 | 12 | 15 | 14 | 16 |
| 80% to 89% | 23 | 24 | 24 | 25 | 16 | 22 |
| 90% to 94% | 14 | 18 | 15 | 9 | 10 | 2 |
| 95% to 99% | 21 | 26 | 23 | 17 | 10 | 6 |
| 100% – Financed entire purchase | 14 | 15 | 12 | 13 | 15 | 14 |
| Median percent financed | 90% | 93% | 90% | 86% | 81% | 76% |
| All Buyers | < 37 | 37 - 51 | 52 - 61 | 62 to 70 | 71 to 91 | |
|---|---|---|---|---|---|---|
| < 6 months | 40% | 38% | 39% | 48% | 47% | 58% |
| 6 - 12 months | 15 | 18 | 14 | 9 | 8 | 6 |
| 12 to 18 months | 9 | 10 | 10 | 7 | 4 | 3 |
| 18 to 24 months | 7 | 8 | 8 | 4 | 4 | 2 |
| over 2 years | 29% | 24% | 27% | 30% | 35% | 31% |
| All Buyers | < 37 | 37 to 51 | 52 to 61 | 62 to 70 | 71 to 91 | |
|---|---|---|---|---|---|---|
| Have had application denied | 5% | 5% | 6% | 7% | 3% | 4% |
| Median number of times application was denied | 1 | 1 | 1 | 1 | 1 | 2 |
| Debt to income ratio | 15% | 18% | 20% | 13% | 9% | 7% |
| Low credit score | 14 | 14 | 22 | 16 | 3 | 3 |
| Income was unable to be verified | 6 | 4 | 12 | 10 | 3 | 7 |
| Not enough money in reserves | 4 | 3 | 7 | 3 | 1 | 6 |
| Insufficient downpayment | 3 | 4 | 4 | 4 | 3 | |
| Too soon after refinancing another property | 2 | 1 | 2 | 6 | 4 | |
| Other | 54 | 60 | 36 | 57 | 68 | 67 |
Assuming you are looking at different saving options to try to build-up enough cash to make a down payment, which one will typically pay-off the fastest?
Savings Account
High-yield savings & money market accounts frequently offer under 1% APY while rarely going much above 2% APY (annual percentage yield).
Certificates of Deposit
CDs tend to offer slightly higher rates than high-yield savings accounts depending on their duration. Since the 2008 Great Recession these have rarely yielded much more than 2.5.-3.25% APY.
Bonds
Government bonds typically pay 1% to 3.5% depending on duration, with longer durations paying higher yields. Some municipal bonds are tax free. Corporate bonds typically offer higher yields than similar duration government bonds with the yield spread premium depending upon broader market conditions and the creditworthiness of the borrower.
High Yield Dividend Stocks
High yield stocks can pay anywhere from 3% to 6% per year dividend income, with that number growing over time as dividends are reinvested. Some highly speculative plays tied to cyclical commodities may offer higher yield, though higher yields are often associated with a higher level of risk of either a dividend cut or a fall in share price.
Exxon Mobil paid $3.48 in dividends in 2020, though their share price fell from over $70 at the begining of the year to a low of $30.11 as the COVID-19 crisis swept the globe then Saudi Arabia and Russia increased production in the face of declining global oil demand. Share price volatility does not matter as long as you can ride it out for many years, but a $3.48 dividend would take over a decade to pay for the above share price decline & that is before you account for income taxes on the dividends.
The 2010s decade was one of the worst decades for value stocks in the history of the markets as many offline activities moved online & things like bank branch network and expensive retail stores are devalued by online apps and ecommerce. In the 2020s interest rates are likely to rise at some point, which could cause a shift away from growth toward value.
Sure Dividend offers newsletters and an advisory service to help investors buy into companies they deem stable. There are also high-dividend ETFS like NOBL which allow investors to quickly buy a broad-basket exposure to Dividend Aristocrats.
Broad stock market index
Historically the American stock market has returned 5% to 10% APY with dividend reinvestment, depending on strategy, with risk of significant drawdowns that frequently happen around recessions. Keeping management fees low is crucial to maximize wealth compouding. Most day traders lose money due to selling winners to soon, holding losers too long, and letting their emotions get the best of them. The American stock market is increasingly skewed toward growth rather than value with many large technology stocks making up a big portion of the S&P 500 index.
As you can see clearly, the stock market is where you will earn the most, over time. However, the stock market is full of risks – risks that are clearly diminished in the other options. A CD has less risk, and a savings account sees almost no risk at all to earn its nominal gains. The market, comparatively, fluctuates more often and dramatically than the other investment options will.
Assuming you have a little extra income to save, you will want to find the best possible return for your investment/savings plans. However, this is going to align pretty directly with your aversion or attraction to risk…a higher propensity to risk allows you to gamble more with stocks, less so, and you'll lean harder into CDs and savings accounts.
You certainly may earn more, faster in the stock market, but it is less certain than the other options. The right answer for most people is a balance of assets spread across multiple asset classes.
According to consumer numbers culled by the Bureau of Labor Statistics (BLS), people in different age groups will tend to save money at different rates.
By their findings, Millennials save an average of $7,624 annually, while Gen-Xers save $12,347. Their data did not accurately reflect Baby Boomers, for it was comparing income to savings and many older boomers did not have a regular income flow to use.
Depending on the size of the down payment, you can do simple math to see how long it might take to save for a down payment. As a Millennial, you are probably looking around five years of saving to get 10% for a moderately priced home today, while a Gen-Xer might take closer to three. It is assumed that Baby Boomers will have more savings and could likely save the money in more like two years' time.
It is important to know all your options, such as piggyback loans, government programs and even the new, historically low APR offers from Fannie Mae and Freddie Mac. Set savings goals and be diligent about paying all existing bills on time, in full.
Also keep in mind that the more you are able to save and put down on your home, the better your terms and costs will be at closing. Though you can get into a mortgage with as little as 5% down today, the fees and costs of that loan could dim or diminish its low-cost entry benefits.
The important thing to remember about a down payment on a mortgage, is how it will affect the terms of your deal. The larger your down payment, the less risk the lender feels so better terms and lower fees will be the reward.
Home prices in the US are on the rise everywhere, so getting started early on your savings/investing plans is a shrewd move forward. The best news for buyers, could be that lenders are competitive and eager to offer you the lowest possible rates, which are usually lower than they were historically.
Although it was true for a long time that you needed 20% down to get into a mortgage, this is certainly not the case in the modern mortgage landscape. However, be aware of how having a larger down payment will help you to save money: both immediately, and over time.
Talk to a financial planner, start spending more frugally and saving more aggressively, and no matter your age group, you will find a path to home buying success.
Explore conventional mortgages, FHA loans, USDA loans, and VA loans to find out which option is right for you.
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