Down Payment

Down payment is the payment you make upfront while you buy a home. The rest of the payment is often financed by a mortgage loan. Watch this quick video to know more about Down Payment. 

Transcript

Down payment is the payment you make upfront while you buy a home. The rest of the payment is often financed by a mortgage loan. When you apply for a mortgage loan, banks and financial institutions typically insist on making a down payment of 20% primarily because of two reasons. 1) Banks are expected to meet the minimum capital requirement to create money in the fractional reserve banking system. 2) If you default on the EMI payment, lenders can recover a substantial fraction of the money you owe them. While purchasing an apartment, people make an initial down payment and structure the rest of the payment in the form of EMIs.