Reddit may be the “front page of the internet,” but the fact that anyone can answer your questions there means the quality of advice you might get can range from hilarious to hilariously wrong. This is especially true when it comes to questions about finances. To make sure you’re getting the actual best answers to your financial questions, we’re starting a new series to address some of the most asked questions we found on Reddit, with answers provided by our network of fee-only financial advisors who are Certified Financial Planners.

We’ve asked one of our network’s advisors, Nannette Kamien (CFP®, MBA, Inspiration Financial Planning), to give us her take on one of Reddit’s most frequently asked questions.

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REDDIT ASKS:

As a first time home buyer: Is it better to put 3.5% down payment and incur mortgage insurance or wait to put 20% down?

And how much roughly would jumping the gun and going for the 3.5% payment cost extra in the long run?

WHAT THE EXPERT HAS TO SAY

Despite what many people think, there is no right answer to be had when deciding how much to put down when purchasing a home. For first-time home buyers, often the decision revolves around timing: How soon could they purchase using a smaller down payment vs waiting until they have a larger down payment? The key factors to consider are interest rates, rental costs, the real estate market, and your own personal financial situation. Unfortunately, many of these factors are out of your control and make it difficult to calculate the “best” answer.

Even if you can calculate what’s “best” given a current set of data and circumstances, life changes. The key factors to consider after purchase are your ability to support the monthly payments – which will be higher if you’ve put less down, the cost of ongoing maintenance and upkeep of the property, and your reduced cash on hand if you’ve put 20% down. In either case, your future choices can be constrained by having higher payments or less cash on hand. Think about the likely changes in your life in the next 5-10 years, and give them proper consideration when thinking about your home-buying decisions.

PROS AND CONS OF A LARGE HOME DOWN PAYMENT

Even if you can calculate what’s “best” given a current set of data and circumstances, life changes. The key factors to consider after purchase are your ability to support the monthly payments – which will be higher if you’ve put less down, the cost of ongoing maintenance and upkeep of the property, and your reduced cash on hand if you’ve put 20% down. In either case, your future choices can be constrained by having higher payments or less cash on hand. Think about the likely changes in your life in the next 5-10 years, and give them proper consideration when thinking about your home-buying decisions. 

Just like with any other financial decision – or any kind of decision for that matter – there are pros and cons to both options. Everyone’s risk capacity is different, so your reaction and your neighbor’s reaction to this list will likely differ. Here are some things to consider when it comes to making a larger down payment: 

Pros: 

• Your monthly mortgage payments will be lower with a larger down payment
• Your interest rate will likely be lower
• Avoid mortgage insurance 

Cons: 

• Takes longer to save – may be renting for longer
• You have less money on hand for future and unexpected expenses like maintenance, etc
• May impact investing and paying off debt (delaying to save for home purchase)

LESSON LEARNED

The true answer to this question will be different for everyone and based on a number of different factors, from the current condition of the housing market to your personal financial outlook. The best way to figure out your answer is to consider where you are now and what you want for the future, in terms of finances as well as things like your personal life and family matters. Think about the likely changes in your life in the next 5-10 years, and give them proper consideration when thinking about your home-buying decisions. This will help you decide which option is best for you and your situation.

Got more questions about home buying, mortgage insurance, and down payments? Get your personalized answers, as well as individualized financial advice personalized for your specific goals by scheduling a call with a financial advisor here.