How to Decide Between Paying Down Debt vs. Putting More Money Down

When buying a home, one of the biggest decisions is how to use the money you’ve saved. Do you put it all toward your down payment, or do you pay off debt first?

There’s no right or wrong answer—it depends on your overall financial picture. The important thing is to consider all your options so you know which choice actually benefits you the most.

A Real Example

I recently helped a client who was purchasing a new home and planned to put $80,000 down. With that down payment, their total monthly expenses (mortgage + vehicle payments) came to about $4,300/month.

Instead, I showed them another option: pay out their $40,000 vehicle loan and put $36,000 down on the house. Their mortgage payment was slightly higher since they put less down, but their monthly expenses dropped by over $600 because the car loan was gone.

That’s the kind of scenario where paying out debt can free up more cash flow and make the monthly budget much more manageable.

Why This Matters

There are many situations where paying out debt may:

Help you qualify for more
Lower your monthly expenses
Improve your cash flow flexibility

Every file is different, which is why it’s so important to have a broker walk through the numbers with you.

FAQ

Will paying off debt always be the best move?
Not always. Sometimes it makes sense to maximize your down payment instead. That’s why running multiple scenarios is key.

Does paying off debt help me qualify for a larger mortgage?
Often yes—because lenders look at your total debt load, not just your mortgage. Eliminating monthly payments can improve your ratios.

What if I don’t have enough saved to do both?
That’s common. A broker can help you figure out which option has the biggest impact on both qualifying and long-term affordability.

Final Thoughts

Whether you put more money down or use your savings to pay off debt, the goal is the same: to put yourself in the best position financially. The right choice depends on your personal numbers and long-term plans, which is why it pays to go through all the options with someone you trust.

[Click here to compare your debt vs. down payment options]