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This Lesson (Personal Finance: Concept of Downpayment in Mortgages) was created by by mukta.dharma(0)
   : View Source, ShowAbout mukta.dharma: I am a student pursuing MBA in India
Down Payment
A downpayment is usually an upfront payment made by the borrower at the time of acquiring the loan. The down payment is a security for the lender so that in case of default, he needs to realize only the difference between total loan and down payment by selling the collateral. Down payment amounts vary based on a number of factors. In competitive and growing markets, down payments on mortgages typically fall between 5-10% of principal. Post 2000, there has also been a trend towards zero-down payment loans. As a result of making the initial downpayment, the borrower might either experience reduced monthly payments for the given term, or a reduced term with the same monthly payments. Given the initial down payment, the monthly mortgage payments can be calculated as follows where dp is the percentage down payment You can also use this calculator. This lesson has been accessed 4939 times. |
