[ITEM 5] QUESTION: How to choose a mortgage down payment?

Choosing the right size of the down payment for a mortgage loan determines not only the comfort of monthly debt servicing, but also the overall financial stability of your family throughout the entire loan repayment period. The generally accepted rule states that the higher the down payment amount, the lower the total loan amount, which leads to a reduced monthly payment and substantial savings on the final bank overpayment.

However, when striving to gather the maximum possible down payment, under no circumstances should you give away absolutely all your available savings and strip your personal budget down to zero. It is imperative to leave a sufficient reserve of cash or bank funds for upcoming expenses related to renovating the purchased apartment, buying necessary furniture, moving, as well as unforeseen life situations like medical treatment or temporary job loss.

Exhausting your financial savings too much for the sake of increasing the down payment by a few percent can lead to a situation where, right after the deal, you find yourself in a financial hole without the ability to buy basic living necessities or make the reduced payment on time if difficulties arise. Therefore, the optimal down payment is a balance between the desire to reduce the debt load and the need to maintain a safety cushion for adapting to a new home.

To properly calculate and choose the optimal down payment size, follow a simple sequence of steps.