Home Affordability SimulatorBuy the house without giving up early retirement

10% down vs. 20% down: what the simulation says

The standard advice — "put 20% down, avoid PMI" — treats the down payment as a payment-optimization problem. It's really a risk allocation problem: every extra dollar you put down converts liquid, layoff-surviving, market-compounding savings into illiquid home equity. Whether that trade helps or hurts depends on things a rule of thumb can't see. So, the simulation: one household buying the same $650K house at 10%, 20%, and 30% down, a thousand futures each, identical random draws.

The same house, three ways

The simulation talks back to the folklore in both directions. Going down to 10% costs this household real odds — 3% of futures — because PMI plus interest on the larger loan drains more, year after year, than the $69,149 it kept invested manages to earn back at these rates. But going up to 30% buys essentially nothing over 20%: the payment falls, the invested balance falls with it, and the two nearly cancel. The folklore says "more down is safer"; the model says the safety plateaus at exactly the point the PMI disappears.

Where the liquidity story is true

Note who this household is: the planner's default, with $250K liquid — even the 30%-down version closes with a comfortable cushion, which is why its forced-sale rate rounds to zero in every row and the whole question gets decided by carrying costs. For a household that would be scraping the account to zero at closing, the calculus inverts: the buffer guide shows the forced-sale rate falling roughly tenfold as the first six months of post-closing cash appear. If putting 20% down means closing with nothing left, a 10%-down purchase with PMI and a buffer is the safer structure, and the simulation will show it for your numbers. "Always avoid PMI" answers the average case; you aren't the average case.

The question underneath: where does a marginal dollar work hardest?

A dollar of extra down payment earns the mortgage rate, guaranteed, in avoided interest — 6.3% here, more if it's also retiring PMI (0.5% of the loan per year until equity reaches 20%). A dollar kept invested earns the market's distribution — 7% expected, with fat left-tail years — and stays reachable in an emergency. At today's spread those forces run close enough that the answer flips on details: the PMI premium, your tax drag, how thin the buffer already is. Which is why this is a number to recompute, not a belief to hold. (Rates move the whole affordability picture, not just this margin.)

What to do with this

Decide the down payment after the emergency fund, not before — the buffer guide quantifies why the months after closing are the fragile ones. Then let the planner grade your actual choice: set your real savings, flip the down payment between 10% and 20%, and watch the odds and the forced-sale rate — not the payment — tell you which version of the purchase is safer. The household here is the planner's default ($220,000 income, $250K liquid); with your numbers, the answer can flip.

Read next