Should I spend All of my Savings on the Down Payment?

Buying your first home can be an exciting and overwhelming experience. You’ve managed your money and credit and have a great score, so you’re certain that you’ll get a great rate. You’ve also accumulated a nice down payment. And you may be wondering: Should I spend all of my savings on the down payment?

          It may be a hard decision whether to put all your savings into a down payment, especially if the extra cash will get you a better interest rate. The good news here is that some of this decision comes down to math. If you’re on the fence, check out a mortgage calculator. Use this prevalent online tool to see just how much you would actually save over life of the loan by inputting varying down payments.

          If home-ownership is your goal, then you know that buying a home takes more than a down payment and a good credit score. If you put all your money down on the home, will there be any left over in case of an emergency? Think about it. If you should fall ill after you’ve taken on a mortgage and have no savings, how will you pay the mortgage? How will you eat? Most financial professionals recommend an emergency fund amounting to at least 6 months of expenses. If your mortgage payment is $1000, then you’ll need $6000 just to cover the mortgage, not to mention food, insurance, utilities and car related expenses. It can add up fast.

          You’re buying a house, right! You may need that money for repairs, furniture, property tax or higher utility costs. You may be surprised by some of the expenses that may pop-up. In the end, every financial situation is different, be sure to thoroughly assess yours before making such big decision.

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