Down payment: How much equity is required?


The down payment is the first partial payment on a loan. A down payment affects the total cost of the loan. If you contribute equity to the financing, the required loan amount decreases. This affects the term and the amount of interest on the loan. The lower the loan amount, the faster the amount can be repaid and the more favorable the interest rates will be. A higher first instalment, due to the lower loan amount and the higher security, causes more favorable interest rates in two ways. In general, you should be able to construction financing Pay at least 20 %.

You can make an initial partial payment for the loan not only in the form of money, but also, for example, by trading in your old car. The first partial payment serves as security for the lender, since it is made in advance. In addition, a higher first installment, but also requires an easier repayment for you, because you have more flexibility in the repayment due to the lower loan amount.

The amount of the first installment and the term of the loan are related. Thus, a higher first installment payment lowers the total cost of the loan. However, the loan down payment is not the same as the first installment. That's because you don't have to pay the first installment until after you make the down payment. Unlike the down payment, the first installment already includes interest costs, which are not incurred with the down payment. The down payment on the loan is in contrast to the first partial payment of a delivery of goods not defined as an advance payment.

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