Down Payment

A down payment is an amount of money paid by a buyer at the beginning of the process of purchasing a costly commodity or service. The down payment is a percentage of the entire purchase price, and the buyer will frequently take out a loan to fund the remaining. A down payment on a house is a classic example of a down payment. The home buyer may pay 5% to 25% of the entire price of the home upfront, with the remaining covered by a mortgage from a bank or other financial institution.