How does the calculator build a home savings plan?
It multiplies the target price by your down payment percentage and by your closing cost percentage, then adds the two to get the total cash needed at closing.
Your current savings are grown at the assumed return, compounded monthly, to the purchase date. That projected amount is subtracted from the total cash needed to find the remaining gap.
The gap is converted into a level monthly deposit made at the end of each month, with deposits also earning the assumed return. If your current savings will already cover the goal, the monthly amount is zero.
Total cash = Price × (d + c) Gap = Total cash − S × (1 + i)^N Monthly deposit = Gap × i ÷ ((1 + i)^N − 1)
- d
- down payment as a decimal
- c
- closing costs as a decimal of the price
- S
- current savings
- i
- monthly rate (annual return ÷ 12)
- N
- months until purchase
Example: a $380,000 home in four years with 10% down
Scenario: Chris and Avery plan to buy a $380,000 home in four years with 10% down. They estimate closing costs at 3% of the price, have $12,000 saved and keep their savings in an account earning an illustrative 3.5%, compounded monthly.
- Down payment$380,000 × 10% = $38,000.00
- Closing costs$380,000 × 3% = $11,400.00
- Total cash needed$38,000.00 + $11,400.00 = $49,400.00
- Current savings at purchase$12,000 × (1 + 0.035 ÷ 12)^48 = $12,000 × 1.1500394 = $13,800.47
- Gap$49,400.00 − $13,800.47 = $35,599.53
- Monthly savings needed$35,599.53 × 0.00291667 ÷ (1.1500394 − 1) = $692.03
Chris and Avery would need to save about $692.03 a month for 48 months to have $49,400 at closing.
Home prices can change over four years; rerun the calculator if the price range you are shopping in moves.
When is a down payment savings plan useful?
Picking a realistic purchase date
If the monthly amount is more than you can save, move the purchase date out a year and see how much it drops. The calculator turns a wish into a timeline.
Choosing a down payment size
Compare 5%, 10% and 20% down. A larger down payment means a smaller loan, but it also means waiting longer or saving more each month.
Budgeting for closing costs
Buyers who plan only for the down payment can be caught short at closing. Including closing costs from the start avoids a last-minute scramble.
Tracking progress
Update your current savings every few months. If you are ahead, the monthly figure falls; if you are behind, you will see it early.
What mistakes do home buyers make when saving?
Forgetting closing costs
Closing costs are commonly a few percent of the price and are due in cash. Leaving them out can leave you thousands short on closing day.
Investing down payment money aggressively
A market drop the year before you buy can delay the purchase. Money needed in a few years is usually kept in insured savings, money market accounts or CDs.
Draining every dollar for closing
Lenders may want to see reserves after closing, and new homes come with surprise repairs. Keeping an emergency fund separate from the home fund protects both.
Exceeding insurance limits in one account
A growing home fund plus other deposits at the same bank can approach $250,000. Deposit insurance applies per depositor, per insured bank, per ownership category, so large balances may need to be spread out.
How does the down payment percentage change the monthly amount?
It is the biggest lever. Keeping Chris and Avery's other inputs the same, moving from 10% to 20% down raises the cash needed from $49,400 to $87,400 and the monthly amount from $692.03 to $1,430.73.
A smaller down payment lowers the savings goal but raises the loan amount and, on many loans, adds mortgage insurance. Comparing these rows alongside estimated monthly mortgage payments gives a fuller picture of the trade-off.
| Down payment | Total cash needed | Monthly savings needed |
|---|---|---|
| 3.5% | $24,700.00 | $211.88 |
| 5% | $30,400.00 | $322.68 |
| 10% | $49,400.00 | $692.03 |
| 20% | $87,400.00 | $1,430.73 |
Terms used on this page
- Down Payment
- A down payment is the cash you pay upfront toward a purchase, such as a car or home, so you borrow less. A larger down payment reduces the loan principal, the monthly payment and total interest, and it lowers the chance of owing more than the item is worth. It can also help you qualify for a better rate.
- Loan-to-Value Ratio (LTV)
- Loan-to-value ratio compares the amount you borrow with the value of the asset securing the loan, shown as a percentage. A $20,000 loan on a $25,000 car is 80% LTV. Lenders use LTV to judge risk: a lower ratio usually brings easier approval and better rates, while an LTV above 100% means you owe more than the asset is worth.
- Compound Interest
- Compound interest is interest earned or charged on both the original principal and the interest that has already built up. Each period's interest is added to the balance, so the next period's interest is a little larger. Over long stretches, compounding makes savings grow faster and unpaid debts grow faster too.
- Deposit Insurance
- Deposit insurance is federal protection for money held at insured banks and credit unions. The FDIC covers bank deposits and the NCUA covers credit union shares, each up to $250,000 per depositor, per insured institution, per ownership category. If an insured institution fails, covered deposits are repaid, including interest accrued up to the limit.
- Certificate of Deposit (CD)
- A certificate of deposit is a savings account that pays a fixed rate for a set term, such as six months or five years, in exchange for leaving your money untouched until it matures. CDs at insured banks and credit unions are covered by federal deposit insurance up to the limit, and early withdrawals usually trigger a penalty.
Down Payment Savings Calculator: common questions
How much cash do I need to buy a house?
You generally need the down payment plus closing costs, and ideally a cushion left over. On a $380,000 home with 10% down and closing costs of 3%, that is $38,000 plus $11,400, or $49,400. Your lender's Loan Estimate will list projected closing costs once you apply. Moving and repair costs come on top.
Do I need to save for closing costs in addition to the down payment?
Usually yes. Closing costs, such as lender fees, appraisal, title insurance and prepaid taxes and insurance, are paid at closing and are separate from the down payment. They are often estimated at 2% to 5% of the price. Some can be negotiated or covered by seller credits, but planning to pay them yourself is safer.
How long will it take to save for a down payment?
It depends on the goal, what you have and what you can add each month. To find it with this calculator, adjust the years until purchase until the monthly savings needed matches what you can afford. In the example, $692.03 a month reaches $49,400 in four years with $12,000 already saved.
Where should I keep my down payment savings?
Most buyers keep money they will need within a few years in insured savings accounts, money market deposit accounts or CDs that mature before the purchase date. These protect the balance from market drops. If you use CDs, check the early-withdrawal penalty in case you find a home sooner than planned.
Is a 20% down payment required?
No. Many loan programs allow smaller down payments, sometimes much smaller. Putting 20% down on a conventional loan generally avoids private mortgage insurance and lowers the loan amount, but it takes longer to save. The table above shows how the savings plan changes with 3.5%, 5%, 10% and 20% down.
Is interest on my down payment fund taxable?
Yes, interest earned in a regular savings account or CD is generally taxable as ordinary income in the year it is credited. On a fund of tens of thousands of dollars, the yearly tax can be a few hundred dollars. The calculator shows pre-tax growth, so set aside a little extra or use a slightly lower return.
What does current savings at purchase mean?
It is what the money you have today is projected to be worth on your purchase date at the assumed return. In the example, $12,000 grows to $13,800.47 over four years at 3.5%. That amount is subtracted from the total cash needed, so your monthly deposits only have to cover the rest.
Should I include moving costs and repairs in my goal?
It is a good idea to plan for them, but this calculator does not include them automatically. You can add an estimate by raising the closing cost percentage slightly or by saving a separate amount. Keeping your emergency fund intact after closing also helps with surprise repairs in the first year.
Sources
- Deposit Insurance — Federal Deposit Insurance Corporation. Accessed October 17, 2026.
- Topic no. 403, Interest received — Internal Revenue Service. Accessed October 17, 2026.
- Certificates of deposit (CDs) — U.S. Securities and Exchange Commission (Investor.gov). Accessed October 17, 2026.
- Regulation DD (Truth in Savings), 12 CFR Part 1030 — eCFR / National Archives. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations, last checked October 17, 2026. See our methodology.