Down Payment

Definition

• A partial payment made at the time of purchase or when a loan originates with the balance to be paid later. First-time home buyers are allowed to put as little as 5% down when purchasing a property.

Synonyms
initial payment, initial cash investment, upfront portion

Alternate Spellings
downpayment, down-payment

Related Terms and Acronyms

• Buy-down — Definition,
  • When a borrower or a mortgage broker "buys down" a mortgage rate, they make an upfront payment to the lender in order to lower the mortgage rate. A similar effect can be achieved by making a lump sum payment at the beginning of a mortgage term.
• Cash Back Mortgage — Definition, Important,
  • A mortgage that provides the borrower a lump sum cash payment.
• Conventional Mortgage — Definition, Important,
  • A mortgage that is not insured or guaranteed by CMHC or GE Capital.
• High-ratio Mortgage — Definition, Important,
  • A mortgage in which a borrower places a down payment of less than 20% of the purchase price.
• Home Buyers' Plan (HBP) — Acronym, Canada, Very Important,
  • A way for a homebuyer to use part of his or her RRSP as a down payment on a mortgage.
  ➥ Government assistance for first-time homebuyers.
• Leverage — Definition,
  • The use of a small amount of cash and a large loan to buy something.
• Low-down Mortgages — Definition, Important,
  • Mortgages with a low down payment, usually less than 10 percent.
• Original Principal Balance — Definition,
  • The amount borrowed.
• Pre-payment — Definition,
  • Applying additional payments towards the balance of a mortgage loan.
• Pre-payment Clause — Definition,
  • A clause that stipulates the amount of principal a borrower may prepay ahead of schedule without penalty as well as the prepayment penalty for larger prepayments.
• Pre-payment Penalty — Definition,
  • A lender's charge to the borrower for paying off the loan before the end of the term.
• Purchase Price — Definition,
  • The total selling price of the home, including the cash down payment and the principal on the loan.
• Seller Carryback — Definition,
  • A form of financing in which the seller of a property accepts a down payment and agrees to accept payments until the property is paid for.
• Trade Equity — Definition,
  • A swap of property, such as real estate or a car, as part of a down payment for other real estate.
• Zero Down Mortgage — Definition,
  • A mortgage product that allows the borrower to financing 100% of their property.