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4 Benefits of Putting a 20% Down Payment on a Home January 11, 2019

Downtown Honolulu, Honolulu
4 Benefits of Putting a 20% Down Payment on a Home, Honolulu, Hawaii

Buying a house, especially for the first time, can bring a mix of excitement and uncertainty. After all, the purchase will likely be the largest financial investment for most people. What may help alleviate some of the anxiety is saving enough for the down payment, which is a percentage of the total home loan amount. The magic number is usually 20%. Here are several reasons why stocking away this much can pay off in the long run.

Why Is a 20% Down Payment Beneficial? 

1. Lowers Monthly Payment

You can potentially lower your monthly mortgage payment if you provide a 20% down payment. Depending on the home loan’s interest rate, the savings can be several hundred dollars, compared to not providing any down payment at all. A smaller mortgage amount may also reap more affordable monthly payments, too.

2. Eliminates Private Mortgage Insurance

home loanMost lenders require borrowers to obtain private mortgage insurance (PMI) if the down payment is less than 20%. The PMI is generally added into the monthly mortgage payment, which can make the financial obligation higher. Bringing in a 20% down payment eliminates the need for PMI and could lower your regular loan payments.

3. Pays Down Loan Faster

A larger down payment means you can potentially pay off your home loan faster. In the first few years of the mortgage, borrowers are typically chipping away at just the interest. With a 20% down payment, you move faster toward paying down the principal, which is the actual loan amount.

4. Increases Loan Approval Chances

If you've put in the time and effort to save a 20% down payment, your due diligence could boost your chances of getting approved for a home loan, as that’s the number must lenders like to see. If you’ve had a few credit mishaps in the past, the 20% down payment can also make up for those financial slip-ups.


Taking the extra time to save for a larger down payment on a house is worth the effort. Aloha Mortgage in Honolulu, HI, specializes in educating its clients about the best home loan options for their unique financial circumstances. Founder and owner Richard Conradt is always committed to making home ownership possible and affordable. Come experience why the locally owned firm has served the entire island of Oahu for more than 19 years. To get started on finding your dream house, call (808) 255-9366 or visit the website for more information on the range of available lending programs.