The down payment calculator answers a question that applies to both homes and cars, even though the right answer looks completely different for each: how much should you actually put down? Enter a purchase price, choose whether you're buying a home or a car, and switch between entering a percentage to find the dollar amount or entering a dollar amount to find the percentage. The tool then shows your resulting loan, your monthly payment, and — critically — what changes if you hit the 20% threshold that gets quoted so often but rarely explained.
At Arb Digital we build calculators like this one because "put 20% down" is repeated as a universal rule when it's really two very different rules wearing the same number. This tool separates them so you can see exactly what 20% buys you in each case.
What This Down Payment Calculator Does
You start by picking whether you're financing a home or a car, since that choice changes what the 20% threshold actually means. Enter the purchase price, then choose whether you'd rather enter your down payment as a percentage and see the dollar figure, or enter a dollar amount and see what percentage of the price it represents — the calculator handles the conversion instantly either way. From there it computes your loan amount, your monthly payment at the rate and term you specify, and, for a home purchase below 20% down, the monthly private mortgage insurance (PMI) cost that lenders typically require. It also shows, side by side, what your payment would look like if you did hit 20% down instead, so you can weigh the trade-off directly.
How to Use It
- Select home or car. This determines whether PMI applies and how the 20% guideline should be interpreted.
- Enter the purchase price. Use the actual agreed price, or a realistic estimate if you're still shopping.
- Choose your entry method. Enter a percentage if you're deciding how much to put down, or a dollar amount if you already know what cash you have available.
- Enter the loan rate and term. Use a rate you've been quoted or a realistic estimate based on current market rates for your credit profile.
- Enter a PMI rate if buying a home under 20% down. A typical range is 0.3%-1.5% annually depending on your credit and loan-to-value ratio — check with your lender for an exact figure.
- Compare the result to the 20%-down scenario shown alongside it to see exactly what a bigger down payment would save you each month.
The Formula — How It's Calculated
Down payment amount = Purchase price × Down payment % (or, in dollar-entry mode, Down payment % = Dollar amount ÷ Purchase price × 100). The loan amount is simply the purchase price minus the down payment, and the monthly payment uses the standard amortization formula: Payment = P × r(1+r)^n ÷ ((1+r)^n − 1), where P is the loan amount, r is the monthly interest rate, and n is the number of monthly payments. For a home purchase with less than 20% down, monthly PMI is estimated as the loan balance multiplied by the annual PMI rate, divided by twelve. As the Consumer Financial Protection Bureau's homebuying resources explain, PMI protects the lender, not the borrower, but it's a real, recurring cost that only disappears once your loan-to-value ratio crosses back above the 20% equity threshold.
20% on a Home: A Real Financial Threshold
On a home purchase, 20% down is not an arbitrary tradition — it's the specific point at which most conventional lenders stop requiring private mortgage insurance. PMI exists to protect the lender in case of default when the borrower has less equity cushion, and it typically costs somewhere between 0.3% and 1.5% of the loan amount per year, billed monthly, until you cross that 20% equity line. On a $350,000 home with a $280,000 loan (20% down), there's no PMI at all. On the same home with 10% down and a $315,000 loan, PMI at even a modest 0.5% annual rate adds roughly $130 a month — money that builds no equity and simply protects the bank. Hitting 20% on a home is genuinely worth pursuing if you can do it without draining your other financial priorities.
20% on a Car: A Completely Different Reason
There's no PMI-equivalent on an auto loan — no insurance product tied to your down payment percentage. The reason 20% down is still recommended for a car is depreciation: a new vehicle can lose 20% or more of its value within the first year, and used vehicles depreciate too, just less dramatically. A small down payment on a car means you can be "underwater" — owing more than the car is worth — almost immediately, which becomes a real problem if the car is totaled, stolen, or needs to be sold or traded before the loan is paid down. Putting 20% down on a car isn't about avoiding a monthly fee like PMI; it's about not starting the loan already behind the vehicle's falling value.
The Trade-Off Nobody Mentions
A bigger down payment is genuinely valuable — it lowers your loan, your payment, your total interest, and on a home it can eliminate PMI outright. But every dollar that goes toward a down payment is a dollar that's no longer sitting in an emergency fund. If a large down payment leaves you with little or no cash cushion, an unexpected job loss, medical bill, or major repair can force you to borrow again — often on a credit card at 20%+ interest, which is a far worse rate than the PMI or slightly larger loan payment you were trying to avoid in the first place. The right down payment is the largest one you can make while still keeping three to six months of expenses in reserve, not simply the largest number your bank account allows on closing day.
A Worked Example: Home
Take a $350,000 home with a 6.5% rate over a 30-year term. At 20% down, you're putting $70,000 down and financing $280,000, with no PMI, for a monthly principal and interest payment around $1,770. Drop to 10% down and you're financing $315,000 instead — the loan payment rises to roughly $1,991, and PMI at a modest 0.5% annual rate adds about $131 a month on top, pushing your true housing payment closer to $2,122. That's a difference of roughly $350 a month between the two scenarios, split between a bigger loan and an added insurance line that exists purely because the down payment fell under the 20% line.
Whether that trade-off is worth it depends entirely on what the extra $35,000 down payment would otherwise be doing. If it would sit in a low-yield checking account anyway, hitting 20% is close to free money in avoided PMI and interest. If it would instead wipe out your entire emergency fund, the smarter move might be a smaller down payment, PMI included, while keeping enough cash on hand to cover a job loss or major repair without new debt.
A Worked Example: Car
Now take a $30,000 vehicle at 7% over 60 months. With 20% down ($6,000), you finance $24,000, and the car's value a year later — after typical first-year depreciation of 20% or more — sits close to what you still owe, keeping you roughly break-even if you needed to sell. With only 5% down ($1,500), you finance $28,500, and after the same first-year depreciation hit, you can easily owe several thousand dollars more than the car is worth. There's no PMI charge showing up on a statement to make that risk visible — it only becomes real if you need to sell, trade, or if the car is totaled and the insurance payout falls short of your remaining loan balance.
See how your down payment and loan interact with your full budget using our house affordability calculator.
House Affordability Calculator All Free ToolsCommon Mistakes to Avoid
- Treating 20% as a fixed rule instead of a threshold to evaluate. On some homes and budgets, a smaller down payment plus a healthy emergency fund is the smarter overall move.
- Forgetting PMI is a monthly cost, not a one-time fee. It's billed every month until you reach 20% equity — model it into your ongoing budget, not just your closing costs.
- Draining all available cash to hit 20%. A down payment that leaves zero financial cushion can cost more later than the PMI or larger loan it was meant to avoid.
- Applying the home-buying 20% logic to a car. There's no PMI on auto loans — the real risk of a small car down payment is being underwater on a depreciating asset, not paying insurance.
- Ignoring the resulting monthly payment. A lower down payment isn't a problem by itself if the resulting payment still fits comfortably in your budget — check both numbers together.
Related Free Tools From Arb Digital
See your full home-buying budget with the house affordability calculator, or check what car price you can afford with the car affordability calculator. Size an exact auto loan payment with the auto loan calculator, protect a small-down-payment car loan with the gap insurance calculator, and check your overall borrowing capacity with the debt-to-income ratio calculator. Browse everything in our free online tools hub.
Frequently Asked Questions
It converts between a down payment percentage and dollar amount for any purchase price, and shows the resulting loan amount, monthly payment, and — for homes under 20% down — the added cost of private mortgage insurance.
On a home, 20% down is the threshold most lenders use to waive private mortgage insurance (PMI). Auto loans don't have a PMI equivalent — the reason 20% is still recommended for a car is to avoid owing more than the vehicle is worth as it depreciates.
Private mortgage insurance protects the lender when a borrower has less than 20% equity in a home. It's typically calculated as a percentage of the loan balance, commonly 0.3%-1.5% annually, billed as part of your monthly mortgage payment until you reach 20% equity.
Not necessarily. A larger down payment reduces your loan and may eliminate PMI, but if it drains your emergency savings, an unexpected expense could force you to borrow again at a much higher interest rate than you saved.
Yes — this calculator supports both directions. Enter a percentage to see the dollar figure, or enter a dollar amount to see what percentage of the purchase price it represents.
Yes — completely free, with no sign-up, no account, and no usage limits. All calculations run locally in your browser and nothing you enter is stored or transmitted.
This tool provides general estimates for educational purposes only and is not financial, tax, legal, or medical advice. Figures are illustrative; consult a licensed professional for decisions.
