Plan ahead and save for down payments on larger loans
A down payment on a loan has potential advantages like lessening your loan amount, shortening the loan term, and affecting your rate. Planning ahead and saving for a down payment and upfront costs can make a big difference on some larger purchases.
First Source Senior Vice President and Director of Member Services Amy DeMetri talks about down payments in her video below.
What is a down payment?
A down payment is money you have saved to use up front when getting a loan. This money is put toward the actual item you are financing, or to pay up-front, out-of-pocket costs associated with the loan. For example, money saved for a down payment on a home, in addition to reducing the amount you need to borrow, could also pay for an appraisal, inspections, and legal/closing fees.
Why save for a down payment?
A down payment can have a number of advantages including:
Lessening the amount you need to borrow
Shortening the length or term of the loan
Sometimes resulting in a better rate
Showing the lending institution good faith up front
Down payments can be helpful for any big ticket purchase, including boats, campers, or farm equipment. For smaller loan amounts or shorter term loans, a down payment may not be necessary. We can help you determine whether your loan may require one.
Funding a down payment
Often we see people waiting to withdraw money from existing long-term savings for a down payment. We recommend starting a new savings fund just for a down payment, as long term savings usually take time to build. It's generally harder to replenish those funds than to start a new savings goal and make monthly loan payments.
When we work on a down payment goal, we'll talk about the purchase price; your current income, debt, and savings; and whether you’ll have funds from a sale or trade-in.
Auto Loan down payments
Considering an auto purchase? There are several down payment considerations specific to this type of loan.
Mortgage Loan down payments
When a new house is part of your plans, you many have questions about how a down payment will affect your costs.
We can help you consider whether you need to make a down payment, and how much you might need. Watch our video below for a brief overview of down payments from Senior Vice President Amy DeMetri, then plan ahead by making an appointment to speak to one of our representatives.
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