- The down payment decision is cash now versus cost later, and the “later” only counts for as long as you keep the loan. Set the holding period honestly.
- Money you don’t put down isn’t idle. A comparison that ignores its return favors the bigger down payment on every run, by construction.
- At 2026 rates, 20% down usually still wins — but by roughly half the margin a payment-only comparison shows.
- PMI is a cost with an end date. The tool terminates it at 78% of purchase price on the amortization schedule, the Homeowners Protection Act’s automatic point.
Why “put down as much as you can” is only half a rule
The conventional advice is that a bigger down payment is always better: smaller loan, lower payment, no private mortgage insurance. All of that is true, and all of it is visible in the first three columns of the table above. What isn’t visible in a payment comparison is the other side of the trade — the $45,000 you didn’t put down is still yours, and it earns something.
This calculator scores each option the way every comparison on this site is scored: cash at close, plus every payment made, plus PMI, plus the balance still owed at the end of the holding period, minus what the retained cash would have grown to. That last term is the one that gets dropped. Dropping it doesn’t change which option wins at today’s rates. It changes the margin by about half, and at a lower mortgage rate or a higher return it flips the answer outright.
The default case, read across
$450,000 at 6.75% on a 30-year, held seven years, with the retained cash earning 5% and PMI at half a percent of the loan per year:
| Down | Cash kept vs. 20% | Total, ignoring its return | Total, counting it |
|---|---|---|---|
| 5% | $67,500 | $667,491 | $640,011 |
| 10% | $45,000 | $656,517 | $638,198 |
| 15% | $22,500 | $644,269 | $635,109 |
| 20% | $0 | $621,971 | $621,971 |
Includes $9,000 closing costs. 20% down wins either way — but the gap to 10% down is $34,546 without the opportunity-cost term and $16,227 with it.
Same winner, half the margin. That matters because $16,000 over seven years is a decision you can reasonably make either way depending on what else the $45,000 is for — an emergency fund, a renovation, a second property. $34,000 sounds like a mistake. The number that was inflated is the one that made it sound that way.
What moves the answer
Mortgage rate vs. return on cash
The core trade. When the mortgage rate is well above what cash earns, borrowing less wins. As the two converge, the smaller down payment catches up. At a 4% mortgage and 7% return, 5% down can win outright.
Holding period
PMI is front-loaded — you pay it in the early years and it stops. A short hold pays proportionally more PMI per year of ownership; a long hold amortizes it away and lets the invested cash compound longer.
PMI rate
Ranges roughly 0.2% to 1.5% of the loan per year depending on credit score and LTV. At 0.3% the smaller down payment looks much better than at 0.9%. Get the actual quote; it’s the most credit-sensitive input here.
What the cash is for
Not in the math, and it should decide close calls. A down payment can’t be withdrawn in an emergency. If the extra 10% is your only reserve, the smaller down payment is worth a modest total-cost premium.
How PMI is modeled
PMI is charged monthly at the stated annual rate on the original loan amount, and stops when the scheduled balance reaches 78% of the purchase price — the automatic termination point under the Homeowners Protection Act. That is the conservative date. You can request cancellation at 80%, some servicers will cancel earlier on a new appraisal showing appreciation, and the PMI removal calculator works through those paths. For the down payment decision itself, the automatic date is the honest baseline: it’s the one you can count on without anyone’s cooperation.
On a 30-year at 6.75%, the schedule reaches 78% of purchase price in roughly 11 years from 5% down, 9 years from 10% down, and 6 years from 15% down. So with a 7-year hold, the 15% option pays PMI for most of the hold and the others pay it for all of it — which is why 15% down doesn’t save as much as it looks like it should, and why the holding period input matters so much.
What the tool holds constant
The interest rate. In practice, conventional pricing includes loan-to-value adjustments that can push the rate or cost higher at 5% or 10% down than at 20%, and that gap widens at lower credit scores. Holding the rate constant isolates the PMI and opportunity-cost effects, which is what this comparison is for. If your lender quotes different rates by down payment, the honest move is to run each through the payment calculator and adjust; the rate spread will favor the larger down payment further.
It also assumes the 78% threshold is measured against purchase price, not a later appraisal, and that the retained cash actually gets invested at the stated return for the whole hold — not spent. If it would be spent, its return is zero, and the bigger down payment wins by the full naive margin. That’s a fair reading of the tool, not a flaw in it.