How much do I need for a down payment?

It depends on the programme and the lender, and this page deliberately avoids quoting a minimum because they vary. What is worth knowing is what the percentage buys: on a 400,000 home, 10% is 40,000 in cash and a 90% loan-to-value ratio, while 20% is 80,000 and lands exactly on the 80% ratio at which private mortgage insurance is normally not required.

When does private mortgage insurance go away?

At two balances, both set by federal statute and both measured against the original value of the property. At 80% you may request cancellation in writing, provided you are current and have a good payment history. At 78% the servicer must terminate it without being asked. On a 400,000 home those are 320,000 and 312,000.

Does paying extra on my mortgage get rid of PMI sooner?

No, and this is the part most often assumed rather than checked. Both thresholds are fixed by the original amortisation schedule and are expressly independent of the outstanding balance, so overpaying changes your balance without changing either date. A larger down payment is what moves you past them, because it changes the schedule itself.

What is loan-to-value and why does it matter more than the amount?

It is the loan divided by the price — 360,000 on a 400,000 home is 90%, while 242,500 on a 250,000 home is 97%. It matters because lenders price off the ratio rather than the amount, so a cheap home bought with a small down payment can carry a higher rate and a longer stretch of insurance than an expensive one bought with a large one.

How long will it take to save the down payment?

The gap divided by what you can put aside each month, rounded up. Saving 1,500 a month against a 20,000 gap takes 14 months; the same gap at 750 a month takes 27. What this does not account for is that closing costs and an emergency fund come out of the same account, so the real target on a home purchase is higher than the down payment alone.

Is a bigger down payment always better?

It lowers the loan, the loan-to-value ratio and the interest rate, and it can remove the insurance entirely — so on the loan itself, yes. The trade is that the cash stops being available for anything else, including an emergency fund, and at very low interest rates the same money may do more elsewhere. That comparison is about your situation rather than about the mortgage.

Down Payment Calculator

Result

40,000.00

Down payment amount

Loan amount: 360,000.00
Loan-to-value (%): 90.00%
Still to save: 20,000.00
Months to save: 14
Years to save: 1.2
Balance at the PMI cancellation date (80% of value): 320,000.00
Balance at the PMI termination date (78% of value): 312,000.00

The down payment percentage is one number that decides three different things at once, and this page shows all three because they pull against each other. On a 400,000 home, 10% down is 40,000 in cash and a 360,000 loan, which is a loan-to-value ratio of 90%. Move to 20% and the cash becomes 80,000 while the loan falls to 320,000 and the loan-to-value ratio reaches 80%. The first thing that changes is obvious, the second follows from it, and the third is the one people forget. Put 20,000 aside for that 40,000 target and, saving 1,500 a month, the gap closes in 14 months. That is the saving question answered. The other half of the page is about what happens afterwards, and it needs stating carefully because the rule is widely misremembered. Private mortgage insurance, the extra monthly charge a lender adds when the down payment is small, does not end when your balance falls to 80% of what you paid. Under the federal statute cited below, the 80% figure is a balance you may ask to have the insurance cancelled at, in writing, once you are current and have a clean payment record over the preceding period — and the 78% figure is a balance at which the servicer must terminate it whether or not you ask. Both are measured against the original value of the property, and both are determined by the original amortisation schedule rather than by what you have actually paid. The practical consequence is worth reading twice: paying extra does not move either date, because the dates were fixed on day one by the schedule you signed. So a larger down payment is the reliable way to avoid the insurance, or to shorten the time you pay it, and extra principal payments are not. On 400,000 the two thresholds sit at 320,000 and 312,000, and they are the same two numbers whether the down payment was 10% or 20% — what changes is whether you are paying the insurance at all.

400,000 home, by down payment percentage

Down payment (%)	Down payment amount	Loan amount	Loan-to-value (%)
3	12000	388000	97
5	20000	380000	95
10	40000	360000	90
20	80000	320000	80

The first column is what you pay now and the last is what the loan costs you over its life, and they move in the same direction for the same reason — which is why the two middle rows are worth comparing rather than the first one alone. At 3% the cash requirement is only 12,000 and the loan-to-value ratio is 97%, the highest in the table and well inside the range where private mortgage insurance applies. At 20% the cash is 80,000 and the ratio lands exactly on 80%, which is the balance at which the insurance is normally not required at all. Between those two rows the loan falls by 68,000 and the ratio by 17 points, and every point of it is priced by the lender. The table does not show closing costs, an emergency fund, or the interest rate attached to each ratio.

Formula

Down payment amount = home price × down payment percentage. Loan amount = home price − down payment amount. Loan-to-value ratio = loan amount ÷ home price. Gap = down payment amount − current savings. Months to save = gap ÷ monthly savings, rounded up. The cancellation and termination balances are 80% and 78% of the home price.

P: Home price
d: Down payment as a percentage of the price
D: Down payment amount in cash
L: Loan amount: the price minus the down payment
V: Loan-to-value ratio: the loan divided by the price
S: What you have saved so far
g: Gap: the down payment amount minus the savings
m: What you add to the savings each month

Use it when you are choosing a down payment percentage rather than accepting one, because the three consequences are not equally visible. The cash amount is the one everybody watches; the loan-to-value ratio is the one a lender prices off, and it moves the interest rate as well as the payment; and the insurance is a monthly charge that appears below 20% down and disappears at the thresholds above. Run the same home at 20% and at 10% and read the last two columns rather than the first, because the first is the one you already know. The saving side is the other use, and its arithmetic is deliberately blunt: 14 months at 1,500 a month for a 20,000 gap, and the same 20,000 at 750 a month takes 27. What the page will not tell you is what else that money has to do — closing costs, an emergency fund and moving costs all come out of the same account, and the down payment is only one claim on it.

Worked examples

400,000 home with 10% down, 20,000 saved and 1,500 a month
1. Down payment: 400,000 × 10% = 40,000
2. Loan amount: 400,000 − 40,000 = 360,000
3. Loan-to-value ratio: 360,000 ÷ 400,000 = 90%
4. Gap: 40,000 − 20,000 already saved = 20,000
5. Months to save: 20,000 ÷ 1,500 = 13.3, rounded up to 14
6. The insurance thresholds: 80% of 400,000 is 320,000 and 78% is 312,000
The default case, and the one to read for the two thresholds. At 90% loan-to-value this loan carries private mortgage insurance, and the balances at which it can be cancelled and must be terminated are 320,000 and 312,000. Note that the second of those — the one the servicer is obliged to act on without being asked — arrives when the scheduled balance reaches 78% of the original price. Neither of those numbers is 80% or 78% of what you owe today, and neither moves because you paid extra. The saving side is straightforward: 14 months at 1,500 a month, with the caveat that closing costs come out of the same account.
The same home with 20% down
1. Down payment: 400,000 × 20% = 80,000
2. Loan amount: 400,000 − 80,000 = 320,000
3. Loan-to-value ratio: 320,000 ÷ 400,000 = 80%
4. The savings already cover the target, so the gap and the saving time are both zero
5. The two insurance balances are unchanged at 320,000 and 312,000
The comparison that makes the first example readable, and the reason the insurance deserves its own columns: the cash requirement doubles, from 40,000 to 80,000, while the loan-to-value ratio lands exactly on 80% — which is the boundary at which the insurance is normally not required at all. So the extra 40,000 buys two separate things: 40,000 less debt, and the removal of a monthly charge for years. That is why a 20% down payment is treated as a target rather than as one option among several. The savings fields are set to match here so the gap closes immediately; at 1,500 a month the 40,000 difference between the two cases takes 27 months to accumulate.
250,000 home with 3% down on 3,000 saved
1. Down payment: 250,000 × 3% = 7,500
2. Loan amount: 250,000 − 7,500 = 242,500
3. Loan-to-value ratio: 242,500 ÷ 250,000 = 97%
4. Gap: 7,500 − 3,000 = 4,500
5. Months to save: 4,500 ÷ 750 = 6
6. Insurance thresholds: 80% of 250,000 is 200,000 and 78% is 195,000
A small down payment on a cheaper home, and the row that makes the point about loan-to-value being a ratio rather than an amount. The cash needed is only 7,500 — less than a fifth of what the first example required — and the loan-to-value ratio is still 97%, higher than any other case here. Lenders price off that ratio, so the smallest cash requirement produces the most expensive loan and the longest stretch of paying for insurance. The two thresholds also scale down with the price, to 200,000 and 195,000, which is worth noticing: they are proportions of the home, not fixed amounts, so a cheaper home does not mean an earlier exit.

Limitations

The biggest thing missing from this page is everything else the cash has to cover. Closing costs, an emergency fund, moving expenses and any immediate repairs come out of the same account as the down payment, and on a purchase they commonly run to a few percent of the price on their own — so a target that only counts the down payment will be reached on paper before it is reached in practice. The rate is absent, which means the loan amount here is not connected to a monthly payment or to the total interest; those are on the mortgage page. The insurance figures are the statutory cancellation and termination balances and nothing more: the statute applies to private mortgage insurance on a residential mortgage transaction, so government-backed loan programmes, which use their own insurance or guarantee arrangements with their own rules, are outside it, as are lender-paid arrangements where the cost is built into the rate instead. The page also cannot tell you the actual date the insurance ends, because that depends on the amortisation schedule of a loan that has not been taken out yet — only the balance it ends at. Two things about the thresholds are easy to get wrong and are worth repeating: the 80% balance is one you must request cancellation at, in writing, while current and with a good payment history, and it is not automatic; and neither threshold moves earlier because you overpay, since both are fixed by the original schedule. Nothing here covers the interest rate difference between a 90% and an 80% loan, which is a real cost on top of the insurance. And no currency is attached to any figure.

Frequently asked questions

How much do I need for a down payment?: It depends on the programme and the lender, and this page deliberately avoids quoting a minimum because they vary. What is worth knowing is what the percentage buys: on a 400,000 home, 10% is 40,000 in cash and a 90% loan-to-value ratio, while 20% is 80,000 and lands exactly on the 80% ratio at which private mortgage insurance is normally not required.
When does private mortgage insurance go away?: At two balances, both set by federal statute and both measured against the original value of the property. At 80% you may request cancellation in writing, provided you are current and have a good payment history. At 78% the servicer must terminate it without being asked. On a 400,000 home those are 320,000 and 312,000.
Does paying extra on my mortgage get rid of PMI sooner?: No, and this is the part most often assumed rather than checked. Both thresholds are fixed by the original amortisation schedule and are expressly independent of the outstanding balance, so overpaying changes your balance without changing either date. A larger down payment is what moves you past them, because it changes the schedule itself.
What is loan-to-value and why does it matter more than the amount?: It is the loan divided by the price — 360,000 on a 400,000 home is 90%, while 242,500 on a 250,000 home is 97%. It matters because lenders price off the ratio rather than the amount, so a cheap home bought with a small down payment can carry a higher rate and a longer stretch of insurance than an expensive one bought with a large one.
How long will it take to save the down payment?: The gap divided by what you can put aside each month, rounded up. Saving 1,500 a month against a 20,000 gap takes 14 months; the same gap at 750 a month takes 27. What this does not account for is that closing costs and an emergency fund come out of the same account, so the real target on a home purchase is higher than the down payment alone.
Is a bigger down payment always better?: It lowers the loan, the loan-to-value ratio and the interest rate, and it can remove the insurance entirely — so on the loan itself, yes. The trade is that the cash stops being available for anything else, including an emergency fund, and at very low interest rates the same money may do more elsewhere. That comparison is about your situation rather than about the mortgage.

References

12 U.S.C. § 4901 — Definitions (Homeowners Protection Act): the cancellation date at 80% of original value and the termination date at 78%, both fixed by the initial amortization schedule and irrespective of the outstanding balance — Legal Information Institute, Cornell Law School (United States)
12 U.S.C. § 4902 — Termination of private mortgage insurance: cancellation requires a written request, a good payment history and being current, while termination on the 78% date is automatic — Legal Information Institute, Cornell Law School (United States)

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