One of the biggest myths of buying a home is that a larger down payment is always better, but that is not necessarily true. It really depends on the person/family and their current financial situation. Here are a few disadvantages of a large down payment:
❌ Longer time to enter the market. The months or years spent saving for a large down payment can delay your chance at homeownership. This means paying rent for that extra time, and if housing prices are rising rapidly in your area, it could result in prices getting away from you.
❌ Less short-term flexibility. Cutting savings to the bone to increase your down payment can backfire, since buying a new home often means dealing with unexpected expenses.
❌ Interference with investments or retirement saving. Money you accumulate for a down payment can take away from money you put toward other goals. For example, you may have to cash in some long-term investments to come up with a down payment, or putting aside money for a home might restrict your retirement or university savings.
❌ Benefits take a while to add up. Many of the benefits of a large down payment reward you more in the long-term than in the short-term, which may not be much use to you if you don't plan to stay in the house long.
Do you have questions? I'd be happy to answer them for you! Give me a call anytime!
Gary 'Mr Action' Fayerman
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