How the split is calculated
The arithmetic is simple but the consequences are large. Your down payment is the home price multiplied by the percentage you choose to put down. Whatever is left over becomes the loan amount the mortgage has to cover.
From those two numbers comes the loan-to-value ratio, or LTV: the loan divided by the price, expressed as a percentage. A 20% down payment leaves an 80% LTV; a 5% down payment leaves a 95% LTV. Lenders watch this ratio closely because it measures how much of the purchase their money is exposed to.
Why the LTV ratio matters
A lower LTV signals less risk to a lender, and that usually translates into tangible benefits for you.
- At 80% LTV or below, most conventional lenders drop the requirement for private mortgage insurance, cutting your monthly cost.
- Lower LTV bands often unlock better interest rates.
- More equity from day one gives you a cushion if home values dip.
Balancing a bigger deposit against cash on hand
A larger down payment shrinks the loan, the interest you pay over time, and often the rate. But tying up cash in a home means less left for closing costs, moving expenses, an emergency fund, or investments that might earn more elsewhere.
There is no single right answer. The 20% threshold is a useful target because of the insurance savings, yet many buyers reasonably put down less to preserve liquidity or to buy sooner.
What is not included here
This calculator covers the price-to-loan split only. Buying a home also involves closing costs — typically a few percent of the price — plus inspection, appraisal and moving costs. Keep cash reserves for those on top of the down payment shown. This is a planning estimate, not financial advice.
Formula
down = price·(downPercent/100); loan = price − down; LTV = loan/priceFrequently asked questions
- Why does a 20% down payment matter?
- At 20% down (80% LTV) most lenders waive private mortgage insurance, lowering your monthly cost.