How Much Does a Down Payment Affect My Monthly Payment?

Your down payment plays a big role in determining your monthly mortgage payments. Putting more money down reduces the amount you borrow, which may help you qualify for a lower interest rate, reducing your monthly payment amount. Putting less money down usually means borrowing more, which may come with higher interest rates and mortgage insurance, raising your monthly payment.

Zillow research shows that about half (48%) of mortgage buyers in 2024 put down less than 20%, with the median mortgage buyer putting down 20% of the final purchase price. Wherever you fall on the spectrum, your down payment will directly influence the amount you pay each month.

Below, we explain which factors affect your mortgage payment — with simple examples and tools to help you visualize the impact.

What your monthly mortgage payment includes

When you explore how down payment size affects your monthly costs, remember that your full mortgage payment includes:

• Principal: The portion of your payment that goes toward repaying the amount you borrowed. Your principal balance decreases over time as you make payments.
• Interest: The cost of borrowing money from your lender. Your interest rate — influenced by your credit, loan type, and down payment — determines how much you pay over the life of the loan.
• Property taxes: Local taxes assessed by your city or county, sometimes collected by your lender and paid on your behalf through an escrow account. 
• Homeowners insurance: A required policy that protects your home and belongings from covered losses like fire, theft, or storm damage. Some lenders will also collect this cost in escrow.
• Mortgage insurance: Conventional loans typically charge private mortgage insurance (PMI) with less than 20% down, while FHA, USDA, and VA loans have their own forms of mortgage insurance or funding fees. Depending on the loan type, mortgage insurance may be paid monthly, annually, or as an upfront fee.

Your lender will provide a Loan Estimate after you apply, which breaks down all costs so you can see your total expected monthly payment.

How your down payment changes your monthly payment

Your down payment affects your monthly mortgage payment in three main ways:

1. Changes how much you borrow
2. May influence your interest rate
3. Determines whether additional fees are required and how much

1. A larger down payment means borrowing less

The more you put down on a house purchase, the smaller your mortgage will be — and the lower your monthly payment.

Say you purchase a $300,000 home with a 30-year fixed-rate mortgage at a 6% interest rate. A down payment of 3% would mean you’re borrowing $291,000 to purchase the home. You’d borrow $21,000 less with a 10% down payment, saving you $125. Increasing your down payment to 20% would mean you’re borrowing $51,000 less than with a 3% down payment — reducing your payment by $305 a month.

*This table is for illustrative purposes and actual amounts depend on your interest rate, credit profile, and mortgage insurance requirements.

2. Your interest rate may change depending on your down payment size

Lenders sometimes offer lower interest rates when you put more money down on a house. A higher down payment shows you’re a financially responsible buyer and have a strong ability to save, reducing their lending risk. Even a small rate change can meaningfully reduce or increase your monthly payment.

Say you’re putting down 3% on a $300,000 house, so you need to borrow $291,000. Your lender qualifies you for a mortgage with a 6.75% interest rate. Your monthly principal and interest payment would be around $1,751. If you put down 10% on the same house, you’d need to borrow less money, a sign to your lender that you have a decent cash reserve. After reviewing all your financial criteria, like debt-to-income ratio and credit, your lender offers you a 6.50% interest rate. The lower rate reduces your monthly payment to $1,706, saving you $45 a month or over $500 a year.

Actual amounts depend on your lender, points, credit profile, and mortgage insurance requirements.

Zillow Home Loans’ BuyAbility tool can help you assess your home buying budget based on current interest rates. Plus, you can get personalized recommendations of homes that fit within your budget on Zillow. 

3. Putting down more may reduce additional loan fees

Your down payment doesn’t just affect how much you borrow — it also determines whether you’ll pay additional monthly fees with your mortgage payment. Oftentimes a higher down payment can reduce or remove additional mortgage fees, like mortgage insurance or government funding fees. Here’s how these costs vary depending on the type of mortgage you choose.

• Conventional loans: If you put down less than 20%, you’ll typically pay private mortgage insurance (PMI), which adds a monthly cost until you reach enough equity to remove it. A down payment of 20% avoids the additional PMI cost.
• FHA loans: All FHA borrowers pay mortgage insurance, including an upfront premium and an annual premium, regardless of down payment amount. With a 10% down payment, you may request removal after 11 years; otherwise MIP lasts for the life of the loan.
• USDA loans: USDA loans don’t require a down payment, but they do charge a guarantee fee, paid upfront and annually.
• VA loans: VA loans also require no down payment, but most borrowers pay a funding fee. Making a down payment of at least 5% can reduce that fee, lowering your overall borrowing cost.

Below is a comparison of the different fee requirements by loan type:

Choosing the right down payment for your budget

There’s no single “right” down payment — only the amount that aligns with your savings, home buying goals, and comfort level for monthly payments. Understanding how your down payment size impacts your monthly mortgage cost can help you strike the right balance.

How a larger down payment lowers your monthly payment: When you put more money down, it reduces the size of your loan and may help you qualify for a lower interest rate. With a smaller loan and potentially better pricing, your monthly payment often drops — and you may avoid mortgage insurance entirely.

How a smaller down payment increases your monthly payment: When you put less money down, you borrow more and may face higher interest rates or added costs like mortgage insurance. These factors increase your monthly payment until you build enough equity or refinance.

When you’re ready to take the next step, get pre-qualified with us at Zillow Home Loans*. We’ll help you compare your mortgage options and determine which down payment scenario works best for your financial situation.

Additional resources:

• How to save for a down payment
• Do you have to put down 20% on a house?
• Down payment assistance programs
• Can you use money gifted to you for a down payment?

*Zillow Home Loans; an equal housing lender. NMLS #10287