Cash required at closing
$40,000
Enter the price, your down payment and the rate. The calculator reports the monthly payment, how long mortgage insurance runs, and what the smaller down payment costs over the life of the loan compared with putting 20% down.
Assumptions this tool makes. The purchase is a conventional first-lien mortgage on a principal residence, amortised in equal monthly payments over the term entered, and the payment shown is principal and interest only, so it excludes property tax, homeowners insurance, HOA dues and every closing cost. Mortgage insurance is modelled as a level monthly premium equal to the rate entered applied to the original loan amount, running from the first month until the balance on the original amortisation schedule first reaches 78% of the purchase price, which is the automatic termination line in the Homeowners Protection Act. A borrower may instead ask for cancellation at 80%, which arrives earlier and is the subject of the PMI removal date calculator, so a borrower who asks and qualifies pays less insurance than this model shows. The premium rate is an input because insurers price it on credit score, down payment, loan amount and loan type; the default is the low end of the range Fannie Mae published for 2022 and is not a quote for any borrower. Every comparison is against the same purchase with 20% down, holding the rate and the term equal on both sides, and no allowance is made for what the cash difference would otherwise earn. A loan-level price adjustment for a loan above 80% loan-to-value, which normally appears as a higher rate rather than a fee, is not modelled. The holding period applies to one figure only. The extra interest, the insurance total and the extra cost compared with 20% down are counted over the whole term and over the premium's full run, so they do not move when the holding period changes; the figure for the years you keep the loan is the one that counts the premium only for the months before the sale and interest only as far as the sale. Selling before the insurance ends, and investing the freed-up cash at a return above the mortgage rate, are different calculations and neither is performed here.
| Down payment | Cash required | Borrowed | Insurance runs | Interest and insurance over the life |
|---|---|---|---|---|
| 5% down | $20,000 | $380,000 | 12y 3m | $594,175 |
| 10% down | $40,000 | $360,000 | 10y | $558,204 |
| 15% down | $60,000 | $340,000 | 7y | $521,277 |
| 20% down | $80,000 | $320,000 | 0m | $477,622 |
| 25% down | $100,000 | $300,000 | 0m | $447,770 |
| Kept for | Extra insurance | Extra interest | Total extra cost | Insurance's share |
|---|---|---|---|---|
| 5 years | $10,440 | $14,426 | $24,866 | 42.0% |
| 10 years | $20,880 | $27,875 | $48,755 | 42.8% |
| 15 years | $20,880 | $39,911 | $60,791 | 34.3% |
| 30 years | $20,880 | $59,703 | $80,583 | 25.9% |
| Insurance rate | Insurance each month | Insurance over the life | Extra interest | Insurance's share |
|---|---|---|---|---|
| 0.58% | $174.00 | $20,880 | $59,703 | 25.9% |
| 1.00% | $300.00 | $36,000 | $59,703 | 37.6% |
| 1.25% | $375.00 | $45,000 | $59,703 | 43.0% |
| 1.50% | $450.00 | $54,000 | $59,703 | 47.5% |
| 1.86% | $558.00 | $66,960 | $59,703 | 52.9% |
A down payment decides two costs, and only one of them is usually discussed. Every dollar paid up front is a dollar the loan does not have to carry, so a smaller down payment produces a larger balance, a larger monthly payment and more interest over the term. A down payment below 20% of the price does something else as well: it places the loan above 80% loan-to-value, where mortgage insurance is required on a conventional first-lien mortgage.
Fannie Mae's own explanation of private mortgage insurance states the trigger plainly, describing PMI as insurance that is usually required with a conventional loan when the buyer makes a down payment of less than 20% of the home's value. The 20% figure is therefore a line belonging to the loan program rather than to the law: no federal statute requires a 20% down payment, and Fannie Mae's own material lists a 3% down payment among the advantages of carrying mortgage insurance.
On the default figures a $400,000 purchase with 10% down leaves a $360,000 loan at 90% loan-to-value. The principal-and-interest payment is $2,492.57 a month, the insurance adds $174.00, and the premium runs for 120 months — ten years — for $20,880 in total. Everything below is measured against the same purchase with 20% down: $80,000 at closing instead of $40,000, and no insurance at all.
Interest on the larger loan is the bigger half of what a small down payment costs, and at the low end of the published premium range it is the bigger half at every holding period from one year to thirty. On the default figures the extra interest is $59,703 and the whole insurance premium is $20,880, so insurance accounts for 25.9% of the $80,583 that putting 10% down costs instead of 20%.
The reason is arithmetic rather than a feature of the assumptions. A 10% down payment borrows 12.5% more than a 20% down payment, and at a fixed rate and term the interest on a loan is proportional to its size, so the extra interest is 12.5% of the smaller loan's interest: 12.5% of $477,622 is $59,703. Insurance, by contrast, is a small percentage of the loan amount charged for a limited period, and it stops once the balance reaches 78% of the original price.
| Down payment | Cash required | Borrowed | Insurance runs | Interest and insurance over the life |
|---|---|---|---|---|
| 5% down | $20,000 | $380,000 | 12y 3m | $594,175 |
| 10% down | $40,000 | $360,000 | 10y | $558,204 |
| 15% down | $60,000 | $340,000 | 7y | $521,277 |
| 20% down | $80,000 | $320,000 | 0m | $477,622 |
| 25% down | $100,000 | $300,000 | 0m | $447,770 |
A $400,000 purchase at 7.40% over 30 years, with the down payment varied
The ladder shows the mechanics of the premium. Insurance stops at month 147 on a 5% down payment, month 120 at 10% and month 84 at 15%, because a smaller loan reaches the termination line sooner, and it disappears altogether at 20% where the loan no longer sits above the line that requires it. The total cost of the purchase keeps falling past that point — 25% down costs $29,851 less over the life than 20% down — but from there on the only thing being traded is cash against interest, with no premium left to remove.
Interest and insurance sit on different clocks, and the holding period is what decides how much of each is actually paid. Insurance runs for a fixed number of months and then stops, so the whole premium is paid only by a borrower who keeps the loan past that point; interest accrues for as long as the balance exists. A sale early in the loan removes the smaller component and leaves the larger one behind.
On the default figures, keeping the loan five years costs $24,866 more than the 20% down purchase would have: $10,440 of insurance and $14,426 of interest. Keeping it thirty years costs $80,583, of which $20,880 is insurance. Insurance's share of the cost therefore rises as the holding period shortens, from 25.9% over thirty years to 42.0% over five, but it stays below half at every horizon, because the loan is carrying 12.5% more principal in each of those months.
| Kept for | Extra insurance | Extra interest | Total extra cost | Insurance's share |
|---|---|---|---|---|
| 5 years | $10,440 | $14,426 | $24,866 | 42.0% |
| 10 years | $20,880 | $27,875 | $48,755 | 42.8% |
| 15 years | $20,880 | $39,911 | $60,791 | 34.3% |
| 30 years | $20,880 | $59,703 | $80,583 | 25.9% |
The default 10% down payment against a 20% down payment on the same purchase
One consequence of the two clocks is easy to miss. Because the extra interest begins in the first month while the premium ends on a fixed date, there is no holding period at which insurance becomes the larger amount: a borrower who sells after a single year has still paid $2,947 of extra interest against $2,088 of insurance. The usual advice to hold a property long enough to recover closing costs does not transfer to this decision, because a down payment carries no closing costs of its own; the comparison is between cash kept and interest paid, and the interest starts immediately.
The premium rate is the one input that can flip the conclusion, and it is set by the insurer through the lender rather than chosen by the borrower. Fannie Mae published a range of 0.58% to 1.86% a year of the loan amount for 2022, and the default on this page is the low end of that range.
Insurance catches up with the extra interest at a premium rate of 1.66% over a full thirty-year term, and at 0.77% if the loan is kept ten years. Both figures fall inside the published range, so borrowers at the upper end do pay more in insurance than in interest: at 1.86% the insurance comes to $66,960 against $59,703 of extra interest, and insurance is 52.9% of the total.
| Insurance rate | Insurance each month | Insurance over the life | Extra interest | Insurance's share |
|---|---|---|---|---|
| 0.58% | $174.00 | $20,880 | $59,703 | 25.9% |
| 1.00% | $300.00 | $36,000 | $59,703 | 37.6% |
| 1.25% | $375.00 | $45,000 | $59,703 | 43.0% |
| 1.50% | $450.00 | $54,000 | $59,703 | 47.5% |
| 1.86% | $558.00 | $66,960 | $59,703 | 52.9% |
The default purchase and rate, with the annual premium varied across Fannie Mae's published range
The crossover can be recovered from two numbers the calculator already reports, which makes it checkable on any inputs. Extra interest divided by the loan amount, divided by the number of months insurance runs, times 1,200 gives the premium rate at which the two are equal. On the defaults, $59,703 divided by $360,000 divided by 120 months is 0.138% a month, or 1.66% a year. The mortgage rate moves the size of the penalty without changing which component dominates: across a full percentage point either way the total extra cost runs from $68,865 to $92,673, while insurance remains between 24.8% and 27.3% of it, because a higher rate lengthens the insurance period at the same time as it raises the interest.
The 20% line is a condition of the loan program rather than a legal requirement, and four practical points follow from that. Each of them is a reason why the figures above are a description of one arrangement rather than a rule about borrowing.
What this page leaves out should be read alongside the figures. Property tax, homeowners insurance, HOA dues and closing costs are absent, so the cash required at closing is the down payment alone. The rate and term are held equal across the comparison, which means the page isolates the effect of the down payment rather than modelling what a particular lender would quote for a particular loan-to-value. And the holding period is applied to both costs, so a borrower who refinances rather than sells is running a third calculation that is not performed here.
Two of the reported figures can be checked without a calculator, and the first is exact. At a fixed rate and a fixed term both the payment and the total interest on a loan are proportional to the amount borrowed. The $360,000 loan is 1.125 times the $320,000 one, so the payment is 1.125 times $2,215.62, which is $2,492.57, and the interest over the life is 1.125 times $477,622, which is $537,324.
The extra interest follows from the same ratio, and no other assumption enters it. 12.5% of $477,622 is $59,703, which is the figure the calculator reports as the extra interest on the larger loan. The identity holds whenever the two loans share a rate and a term, which is why the page fixes both when it compares down payments.
The insurance total is a single multiplication. $360,000 at 0.58% a year is $2,088 a year, or $174.00 a month, and the premium runs for 120 months, giving $20,880. Adding the two gives $80,583 of extra cost, of which insurance is 25.9%.
A few cents of disagreement with your own working is the rounding order. More than that means one of the two implementations is wrong, and the corrections page explains how to report it.
A 20% down payment is not required by any federal statute, and Fannie Mae's own material on private mortgage insurance lists a 3% down payment among the advantages of carrying it. The 20% figure matters because it marks the loan-to-value above which a conventional loan needs mortgage insurance, which Fannie Mae describes as usually required when the down payment is less than 20% of the home's value. Below that line the purchase is available and the premium is part of what it costs.
On the default figures, putting 10% down instead of 20% costs $80,583 over the life of the loan: $59,703 of extra interest on the larger loan and $20,880 of mortgage insurance. The cash kept at closing is $40,000, so the trade runs at about two dollars of lifetime cost for every dollar held back. Both figures assume the loan runs to term at a fixed rate and that the cash difference is not invested at a return above the mortgage rate.
Mortgage insurance is usually the smaller of the two costs rather than the larger. At the low end of Fannie Mae's published premium range the extra interest on the larger loan exceeds the entire premium at every holding period from one year to thirty, standing at $59,703 against $20,880 over a full term. Insurance takes the larger half only when the premium rate is high enough, which on the default figures is 1.66% over a full term and 0.77% over ten years.
It can, and that effect sits outside this calculator. A loan above 80% loan-to-value is priced with loan-level adjustments, and Fannie Mae's consumer material states that putting less than 20% down may mean a higher interest rate. Because the adjustment depends on a lender's pricing grid rather than on the arithmetic of the loan, the calculator holds the rate you enter and reports the cost of the down payment at that rate alone.
Selling ends the insurance but refunds none of the interest already paid. On the default figures a five-year hold costs $24,866 more than the 20% down purchase would have, made up of $10,440 of insurance and $14,426 of interest, against $80,583 over a full thirty years. Insurance is a larger share of a short holding period, 42.0% rather than 25.9%, but it is not the larger amount even then.
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Cluster us/mortgage · Unit us-mortgage-down-payment-calculator · Engine amortizing-loan / down · Method: The amount borrowed is the price less the down payment, the loan-to-value is that balance divided by the price, and the monthly payment is the standard amortizing payment on the balance over the term at the stated rate. Mortgage insurance is a level monthly premium equal to the entered annual rate applied to the original loan amount, charged from the first month until the balance on the original amortisation schedule first reaches 78% of the purchase price, which is the automatic termination line in the Homeowners Protection Act. Every comparison is against the same purchase with 20% down and against the same rate and term, so the extra interest is the difference between the total interest on the two schedules. The extra cost is the extra interest plus the premiums, and the extra interest is cumulative interest paid by the end of the stated holding period on the larger loan less the same figure on the 20% down loan.