Down Payment Calculator
Work out the deposit you need, the total cash to close including fees, and how long it takes to save it at your current rate.
How to use this calculator
- 1Choose whether you are starting from a house price or from what you have saved.
- 2Set the deposit percentage. 20% avoids mortgage insurance in most markets.
- 3Check the closing-cost percentage against a real quote — 2–5% is typical but it varies widely by location.
- 4Add your monthly saving to see how far away the target is.
How the calculation works
Deposit = Price × d Cash to close = Price × (d + c) Price (from savings) = Cash / (d + c)- d
- Deposit as a share of the price
- c
- Closing costs as a share of the price
Both the deposit and the closing costs scale with the price, which is what makes the reverse calculation a single division rather than a search.
Closing costs are additional to the deposit, not part of it. Budgeting only for the deposit is the classic first-time-buyer error.
Worked example
A $400,000 house with a 20% deposit
- 1.Deposit: 20% of $400,000 = $80,000.
- 2.Closing costs: 3% of $400,000 = $12,000.
- 3.Total cash needed at completion is $92,000 — not $80,000.
- 4.With $15,000 saved, $77,000 remains. At $1,200 a month that is about 5 years 5 months.
Result: $92,000 cash to close, about 5 years 5 months away
What a down payment actually does
A down payment is the portion of a purchase price paid in cash up front, with the rest covered by the loan. It directly sets the loan-to-value ratio — the size of the mortgage relative to the value of the home — which is one of the biggest single factors a lender weighs when pricing risk. A larger down payment means a smaller loan, less interest over the life of that loan, and a lender taking on less risk if property values fall.
It also signals commitment: money already committed to a purchase is harder to walk away from, which is part of why lenders treat a bigger deposit as evidence of a safer borrower and often price the loan accordingly.
Where a down payment typically comes from
There is no single source lenders require, but a few are common in practice.
- Personal savings — built up over time specifically for the purchase — the most straightforward source and the one lenders scrutinise least.
- Gifted funds — money given by a family member, which most mortgage programmes allow but typically require to be documented with a signed gift letter confirming it does not need to be repaid.
- Proceeds from a previous sale — equity released from selling an existing home, rolled directly into the next purchase.
- Down payment assistance programmes — grants or low-interest second loans offered by some state, local or employer programmes, aimed mainly at first-time buyers, with rules that vary widely by programme and location.
The deposit is not the whole cash requirement
The figure that catches many first-time buyers off guard is not the deposit itself but everything paid alongside it. Closing costs — legal and lender fees, appraisal, title insurance, recording charges, and often prepaid tax and insurance — are due at the same time as the deposit but are a separate expense, not part of it. Budgeting only for the deposit and forgetting this second, smaller pile of cash is one of the most common planning mistakes in a home purchase.
How big should a down payment be?
There is no universally correct deposit size — it is a trade-off between a few competing goods.
- Avoiding mortgage insurance — many lenders waive it once the deposit reaches around 20% of the price, which is why that figure is such a common target even though smaller deposits are widely available.
- Keeping cash in reserve — money paid into a house is not easily recovered without selling or borrowing against it again, so putting every available dollar toward the deposit can leave a household without a cushion for emergencies.
- Opportunity cost — cash used for a larger deposit is cash not invested elsewhere — whether that trade-off favours a bigger deposit or not depends on the loan rate, expected investment returns and personal risk tolerance.
Reaching a savings target faster
A few habits reliably shorten the time it takes to save a deposit.
- 1Automate a fixed transfer — moving a set amount to a dedicated account on payday, before it can be spent elsewhere, tends to be far more reliable than saving whatever is left at the end of the month.
- 2Keep the money somewhere it can grow safely — a savings account or similar low-risk vehicle earning interest gets you to the target faster than cash sitting idle, without exposing near-term savings to market swings.
- 3Revisit the closing-cost estimate, not just the deposit — saving toward the full cash-to-close figure avoids a shortfall discovered right before completion.
What this assumes, and where it stops
Assumptions
- Closing costs are a flat percentage of the price. In reality some components are fixed fees and some scale.
- Savings accumulate at the stated rate with no interest earned on the balance.
Limitations
- Does not model government schemes, shared-ownership products, gifted deposits or first-time-buyer relief, all of which change the arithmetic substantially.
- Moving costs, immediate repairs and furnishing are excluded — budget for those separately.
- Interest earned on your savings while you accumulate is not included, which makes the timeline slightly pessimistic.
Common questions
How much deposit do I actually need?
It depends on the loan. Conventional loans in the US can go as low as 3%, FHA 3.5%, and some VA and USDA loans need nothing at all. But 20% is the threshold where mortgage insurance disappears and rate bands improve, which is why it remains the common target.
Are closing costs part of the deposit?
No — they are on top, and they are the surprise that derails more first purchases than any other. On a $400,000 house a 3% closing cost is $12,000 of extra cash needed on completion day, separate from the deposit.
Is a bigger deposit always better?
Not automatically. Beyond 20% the marginal benefit is just the interest saved on a slightly smaller loan, and that money is then locked in the house. Emergency savings and higher-interest debt usually deserve the cash first.
Sources
- Understanding down payments — US Consumer Financial Protection Bureau
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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