Answer: Making a larger than required down payment on a given home will reduce the amount of the monthly payments.
Explanation: A down payment is an upfront payment that is made when purchasing a home, a vehicle, or any other asset.
The down payment is a percentage of the full purchase price. The money will generally come from personal savings, and most times, payment is made with a check, a credit card, or an through electronic means.
Larger down payments reduce monthly payments on installment loans. For instance, let us imagine a car is bought for $15,000. If a loan is taken for the $15,000 with a 3% interest rate and a four-year term, the monthly payments will be $332.
However, if a down payment of $3,000 is made, only $12,000 will need to be borrowed, and monthly payments will now fall to $266. That is a savings of $66 per month or $3,168 over the four year (48-month) life of the loan.
