When it comes to the overall cost of your mortgage for a Boston home, the size of your down payment can have a significant impact. A larger down payment typically leads to a lower overall cost in several ways:

1. Loan Amount: A larger down payment reduces the amount of money you need to borrow from the lender. This means you will have a smaller loan amount, resulting in lower monthly mortgage payments.
2. Interest Payments: With a smaller loan amount, the total interest paid over the life of the mortgage will be reduced. This is because the interest is calculated based on the outstanding loan balance. By making a larger down payment, you decrease the principal balance, which in turn lowers the amount of interest paid over time.
3. Mortgage Insurance: If your down payment is less than 20% of the purchase price, you may be required to pay for private mortgage insurance (PMI). However, if you make a larger down payment, you may be able to avoid or reduce the need for PMI, saving you additional costs.

Let's consider an example to illustrate the impact of down payment size on the overall cost of a mortgage for a Boston home:

Suppose you are purchasing a home in Boston for $500,000 and have two options for your down payment:

• Option 1: A 10% down payment ($50,000)
• Option 2: A 20% down payment ($100,000)

Assuming an interest rate of 4% and a 30-year fixed-rate mortgage, let's calculate the overall cost for each option:

Option 1:

Loan Amount: $500,000 - $50,000 = $450,000

Monthly Mortgage Payment: $2,148.37

Total Interest Paid: $343,813.23

Total Cost (Principal + Interest): $793,813.23

Option 2:

Loan Amount: $500,000 - $100,000 = $400,000

Monthly Mortgage Payment: $1,909.66

Total Interest Paid: $257,915.47

Total Cost (Principal + Interest): $657,915.47

As you can see, making a larger down payment (Option 2) not only reduces your monthly mortgage payment but also significantly lowers the total interest paid over the life of the loan. In this example, the overall cost is reduced by approximately $136,897.76.

It's important to note that these calculations are simplified for illustrative purposes and do not include other factors such as closing costs, property taxes, or potential changes in interest rates.

To fully understand the impact of down payment size on the overall cost of your mortgage for a Boston home, it's recommended to consult with a mortgage professional who can provide personalized advice based on your specific situation.

References:

1. Consumer Financial Protection Bureau - Private Mortgage Insurance
2. Bankrate - How to Choose the Best Mortgage Down Payment