This would be for a condo if it matters, I don’t know if there are any differences between loans for that vs a single family home.
So if your credit score is good (I know nothing about mortgages, I need a good introduction) and you offer to put more than 20% down, are there any benefits to doing so like a lower rate? This would be for a 15 year term.
The obvious advantage is that the more you put down, the smaller your payments will be. And somewhere around 20% is the threshold where you won’t need to pay PMI. Other than that, there isn’t likely to be an advantage to putting down any more.
That was my impression, PMI drops off after 20% down, but beyond that all you do is make a smaller loan.
However if that is my goal, I could just put 20% down and make extra principal payments down the line, that’d give me more flexibility.
You didn’t mention which country you are asking about, but here in the Netherlands it is normal for banks to offer a lower interest rate if the mortgage covers a smaller percentage of the appraisal value of the house.
For example, right now, my bank offers mortgages where the interest rate is locked in for the next 10 years at a rate of 1.7% if the loan is less than 67.5% of the house’s value, 2.1% for between 67.5% and 90%, and 2.4% for more than 90%. Other banks such as ING have more fine-grained offerings.
If you are ever in a position of negative equity, you still may be in a position to sell at a loss without problems from your lender, if this is a second home and one day you need some money for a large unexpected expense this might be useful
I don’t have anything to add to the 20% question beyond what others have already said.
As to the above snip … Many of the loans and rates you see advertised are assuming a single family dwelling. You’ll probably pay more than that advertised rate for a condo loan of the same size. In my case a couple years ago it came to almost 3/4ths of a percent more.
If you are thinking about a VA loan, those are generally not available on condos. There are exceptions, but they are very rare.
Other condo-specific factoids to consider:
When buying a condo there is a monthly (or quarterly) maintenance fee to operate the condo association and care for the grounds and such. Do not forget to include that in your budget calcs. And that it will increase annually at roughly the rate of inflation or slightly greater.
Also recall that a mortgage payment typically consists of PITI = principle, interest, taxes and insurance. Assuming a fixed rate loan, the PI are fixed for the life of the loan. The TI are also subject to annual increases at more or less the rate of inflation.
More than one buyer has been surprised by condo fees and / or the effect of a few years’ inflation on their TI & their condo fees. E.g. for me right now the fixed PI part is about half my base monthly housing cost. The TI & condo charges are the other half and they climb at roughly the rate of inflation and will continue to do so UFN. 27 years from now when I finish paying off the mortgage the fixed PI will probably be more like 25% of my monthly outlay as the others will have doubled or tripled in that time.
Let me point out that money invested in your dwelling is earning money (in the form of reduced rent) absolutely tax free. Of course, in the US, with deductibility of mortgage interest, this makes less of a difference than elsewhere.
Thus do poor people who pay rent subsidize the middle and upper classes.
I know that in my case a number of the fees associated with my mortgage were determined as a percentage of the overall loan. So, if I had taken a smaller loan, I would have also paid less in fees to obtain the loan.
I’m not sure how you support this conclusion, at least in the US. People who rent don’t get a mortgage deduction because they don’t have a mortgage payment. They also don’t pay property tax, which can easily exceed the value of a tax deduction.
Of course, you could say that renter’s property tax is built in to their monthly rent, but by the same token it could be argued that the rent would be higher if the landlord did not get a mortgage tax break.
I don’t see any scenario where poor renters are subsidizing landowners.
We put down just enough money so that our loan would qualify as standard and not jumbo (jumbo loans have a higher interest rate). It turned out to be about 30%.
Unless you are in San Francisco or Manhattan, I doubt a condo will put you in the jumbo loan category, which is currently loans over about $424,000.
Another consideration is the average return of your excess capital investments. If the after tax interest rate on your mortgage is significantly less than your after tax return on investments, then using that additional cash invested in your portfolio is probably better off than invested in your condo.
…or where renters are necessarily poor.
(Responding more to Hari Seldon than you.)
I’m upper-middle class and a lifelong renter, and I don’t think my rent is subsidizing anyone. The rent vs mortgage thing is often much closer to a wash now than in the old days (or even 23 years ago, when I started renting). For me, the decision is about location and flexibility – not a bottom line.
Or Washington, D.C. 
With the current interest rates, which are historically pretty low, I don’t believe there’s an advantage to a higher down payment. However, it’s always a good idea to pay a little extra on each payment, to reduce the principal. Just a small over-payment will result in a huge reduction in the overall cost of the loan.
Unless the tax codes are vastly different in other places, landlords always get to deduct mortgage interest and taxes in determining their income from the rental. So the cost to a landlord of a property is the same regardless of jurisdiction. In the United States, home mortgage interest (even on a second home!) is deductible while other kinds of consumer interest are not. If you look at the “interest” section of Schedule A https://www.irs.gov/pub/irs-pdf/f1040sa.pdf you’ll notice the only line that has nothing to do with home mortgage interest is investment interest, which should clearly be deductible as an income-producing expense and could realistically be included under other investment expenses, although there they would be subject to the 2% of AGI floor.
So if you own your home, you get to deduct from your income two expenses (interest and property taxes) related to providing you shelter and amenities. If you rent, the portion of your rent that is due to interest (or other cost of capital if owned outright) and property taxes is absolutely not deductible.
Of course, if too many people are removing themselves from the rental market, then rents will go down and encourage people to remain renters. But on the flip side of that, the cost of homes to landlords will go up as more people are trying to buy them, making investing in rental property a more risky proposition, leading to a reduced supply of homes available for rent and/or higher rent rates. I don’t have a degree in economics to be able to suss out the magnitude of the overall effect, but I suspect that in general home prices are slightly higher than in other jurisdictions and rents slightly lower, but not by enough to offset the tax advantage if one were to buy their own home and be able to deduct mortgage interest and property taxes.