A down payment or deposit is an initial up-front partial payment that a buyer pays when making a large financed purchase. This is typically associated with things such as the purchase of a car or property. In regards to property, nearly every type of mortgage requires some form of down payment although its size may vary.
The down payment and adjusted monthly payments can be easily determined using our mortgage calculator.
Some may prefer a higher down payment as it typically translates to lower monthly payments. Others may go for a lower down payment because it requires less initial capital. The down payment depends on the amount the borrower is willing to put down and the requirements of the lender.
The type of asset such as a foreclosed asset, single family home, or multiple family residence rarely affects the amount required to put down.
Typically the average down payment requirement can range as low as 3% and reach 20% or higher. This is based on a multitude of many factors and can include the borrowers’ age, their credit score, and reason for purchase.
Down payment requirements tend to be higher if the buyer intends to live in the property. On the other hand, buying a property as an investment as a rental usually has lower requirements.
In some cases where the down payment amount is low, the lender may require mortgage default insurance. This may also be required in some cases where the borrower has a low credit score ranking.
Sources of funds for a down payment can include savings, refinancing a different property, and selling assets to name a few.