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Ask Money

A Big Downpayment?

Chris Farrell Apr 8, 2008

Question: I am searching for a new home (main residence) and was wondering whether I should use a huge downpayment and dent my assets or take a large loan and keep some assets, considering inflation, decreasing mortgage rates, and current turmoil. Thank you — I love you show. Thank you for not printing my name. Anonymous.

Answer: I wonder what you mean by a “huge downpayment”? The traditional figure of a 20% downpayment is good benchmark. I wouldn’t strap myself for cash–a home take money to maintain–to far beyond that percentage. And with the economy is recession or near-recession I’d want to have a healthy cash emergency safety net. Call it your “just-in-case” money. You can always accelerate principal payments on your own if it makes sense.

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