Larger Down Payment vs Faster Loan Payoff
A **larger down payment** cuts loan size, may eliminate PMI, and lowers every future payment. **Extra principal** after closing preserves closing-day cash while still saving interest—best when PMI is not an issue.
Step by step
1. Check PMI threshold
20% down often removes PMI—high impact on monthly.
2. Compare IRR of cash
If mortgage rate is 6%, extra principal earns 6% risk-free.
3. Keep reserves
Do not drain emergency fund for down payment alone.
Down payment vs extra principal
Down payment helps approval; extra principal helps after you are stable.
- Larger down: Lower payment from day one; less cash at close.
- Extra principal: Flexible amounts; payment unchanged unless recast.
Use our calculators
Common mistakes
- Zero reserves after 20% down
- Prepaying while carrying credit card debt
FAQ
Which saves more interest?
Earlier principal reduction wins—large down payment is earliest.