Down Payment Optimizer

The calculator automatically generates up to three scenarios based on your home price and available savings. Minimum down is 5% (floored at 3% if savings are tight). The 20% threshold scenario only appears if your savings can reach it. The maximum scenario uses all available savings up to 90% of the home price. If two scenarios would be close to the same amount, one is dropped to keep the comparison meaningful.

For each scenario, wealth at the horizon = home equity + investment portfolio. Home equity = home value at horizon minus remaining loan balance. The investment portfolio starts with whatever cash is left after the down payment (savings minus down payment) and grows at your investment return rate. The minimum-down scenario has the most cash invested from day one, but the highest monthly payment. Other scenarios have less initial capital but invest the monthly payment savings each month.

The minimum-down scenario sets the reference monthly burden (highest payment + PMI). Every other scenario has a lower monthly burden. That monthly difference is invested each month at your investment return rate. This means the "no PMI" or "max down" scenarios are credited for every dollar saved on mortgage payments — the question is whether those savings outweigh starting with less invested capital.

PMI applies when the down payment is less than 20% of the purchase price. It's calculated as (original loan balance × PMI rate) ÷ 12 per month. PMI automatically cancels when the outstanding loan balance reaches 78% of the original purchase price (per federal law). The cancellation month is computed analytically from the amortization schedule and is reflected accurately in the month-by-month simulation. One simplification: this model applies a single PMI rate across all scenarios. In practice, PMI is priced by lenders on a tiered basis — a 5% down loan will typically carry a higher PMI rate than a 15% down loan, sometimes by 0.3–0.5 percentage points, because lower down payments represent higher risk. If you're comparing scenarios with meaningfully different down payments, use the Custom Scenario field to isolate one case and adjust the PMI rate to reflect the rate you'd actually be quoted at that LTV.

There is generally a year at which the larger-down-payment scenario overtakes the minimum. Early on, the minimum scenario benefits from having more capital invested. Over time, the interest savings and PMI avoidance from putting more down compound and eventually catch up. The chart shows this crossover clearly. If your horizon falls before the crossover, minimum down wins. After it, more down wins.

This model does not account for: tax deductibility of mortgage interest (reduces the effective cost of a larger loan for some taxpayers); the fact that putting less than 20% down may result in a slightly higher interest rate from some lenders (typically 0.125–0.375% higher); the liquidity value of keeping cash accessible vs. locked in equity; or the behavioral reality that some people don't actually invest the monthly savings. Adjust your investment return assumption downward if you're uncertain whether the freed-up capital would truly be invested.