Back to Glossary
A down payment is an initial upfront payment made when buying something expensive, like a house or car, reducing the amount you need to borrow.
In Depth
When you make a large purchase, a down payment is the portion of the total cost you pay immediately from your own funds. This reduces the amount of money you need to finance through a loan. A larger down payment often results in lower monthly payments, less interest paid over the life of the loan, and can make it easier to qualify for better loan terms. It shows the lender you have a financial stake in the purchase.
Example
To buy their first home, they saved up a 20% down payment, which helped them avoid private mortgage insurance.