While it may sound tempting to hang on to your money and spring for a lower down payment, there are significant benefits to saving that larger amount. Before you decide on that lower sum, it is important to remember that the amount you put down will ultimately determine how large your monthly mortgage payment will be.
Even if you’ve already taken the steps to prep for home buying this spring, a bigger down payment can speed up the process. A larger down payment can boost your chances of getting approved for the mortgage and if you happen to get caught in a bidding war—which could be a popular real estate phenomenon this spring—the bigger sum could place you ahead of the other parties.
Better Interest Rate
Mortgage rates are a crucial element of your real estate purchase in Anchorage, Alaska and your down payment can rule which are available to you. A larger down payment can land you a better interest rate, lowering your loan-to-value ratio and the lender’s initial risk. Consider how much money you can save over the life of your mortgage loan with a lower interest rate— the larger down payment may be worth it.
Avoid Private Mortgage Insurance
It is not uncommon for homebuyers in Anchorage and the Mat-Su Valley with less than 20 percent down to need to purchase private mortgage insurance (PMI). This insurance protects the lender should you be unable to pay down the road, but does take a toll on your monthly payment. On the other hand, a larger down payment will allow you to avoid buying mortgage insurance.
Lower Mortgage Payment
If you have used a mortgage calculator to determine the costs of buying a home in Alaska, you will notice that a larger down payment lowers your monthly mortgage. Not only will you save money in interest over the life of your Alaskan home loan, but you will have more money in your monthly budget for home-related expenses.
Northern Edge Real Estate can walk you through the home buying process every step of the way! From getting pre-approved to determining the best down payment to starting your home search, we are happy to provide recommendations and suggestions to make your Alaskan real estate experience as smooth as possible.