I have about $75k in savings, and am looking to spend about $45k on a down payment (20% down payment) on a house. That being said some coworkers have been trying to convince me to just do a 0% VA Loan and spend the savings on investments. Just looking to get some pros and cons of 0% down or 20% down.
Context: Navy E-5 W/ Dependent
Posted by CornFlakesMyGoodSir
4 Comments
At these interest rates you’re getting essentially a tax free 7% return on your down payment. Not bad at all.
I think the current market has made it such that it truly is just a “pick your poison” scenario. Interest rates are 6-7%. A conservative assumption about the market is that it’ll grow ~7% year over year. The 100 year average is like 9-10%.
Theoretically, you’d make more money in the market on average than the additional cost in interest over the 30 year term.
But your monthly payment will obviously be higher if you didn’t do 20%. But then you’d have a nice nest egg in case something goes wrong.
I think I would lean towards less of a down payment and more in the market. But I’d weigh if that increases fees. And all of that depends on what interest rate you can secure.
I’d save the down payment and keep a sizable emergency fund in a HYSA. You can always pay down principal later on if you’d like. The rest I’d transfer to a Roth IRA market index fund. You can always take back your Roth IRA contributions if times get tough.
Cash on hand (liquid) is more valuable than being locked away in equity.
Keep 6 months of an emergency fund and put the rest into your downpayment. You will be saving literal hundreds of thousands by having a smaller initial loan.