Definition
Down Payment
A down payment is the portion of a property's price the buyer pays upfront from their own funds, with the remainder financed through a home loan.
Because regulators cap the loan-to-value ratio, lenders finance only part of the property cost, so the buyer must arrange the rest — often a meaningful share — plus stamp duty and registration charges, which loans generally do not cover. Saving this lump sum is usually the biggest hurdle to home ownership.
A larger down payment reduces the loan, the EMI and total interest, and can improve loan terms, while a smaller one preserves liquidity but increases borrowing. Buyers should build the down payment (and the extra registration costs) through a dedicated, goal-based savings plan, keeping the money in safe, liquid instruments as the purchase nears.
Related terms
- Goal-Based PlanningGoal-based planning is an approach that ties every investment to a specific life goal — a home, a child's education, retirement — with its own timeline, target amount and strategy.
- Stamp Duty and Registration ChargesStamp duty and registration charges are state government levies paid when buying property — a transaction tax plus a fee for officially recording the transfer.
- Loan-to-Value Ratio (Home Loan)The loan-to-value (LTV) ratio is the proportion of a property's value that a lender is willing to finance through a home loan, with the rest funded by the buyer's down payment.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.