What Is Down Payment?
A down payment is the portion of a home's purchase price a buyer pays upfront in cash, with the remainder financed through a mortgage.
Example
A $400,000 home with a 10% down payment requires $40,000 upfront, with $360,000 financed.
Try it: Down Payment with your own numbers
Interactive and illustrative: change any value and the results update instantly in your browser. The figures come from the same engines as REAIXO's full calculators.
Loan-to-value and the PMI thresholds
Lenders divide the loan by the lower of the price and the appraised value. Above 80%, a conventional loan usually needs private mortgage insurance.
- Loan-to-value
- 81.01%
- PMI usually required
- Extra cash to reach 80%
- $4,000
- Bigger down payment, smaller loan
- Scheduled payments to 78%
- 3.2 years (38 months)
- When PMI ends automatically
- No PMI (0%-80%)
- PMI usually required (80%-95%) - you are here
- High LTV (95%+)
- 78%: PMI ends automatically (scheduled)
- 80%: PMI can be cancelled on request
- 97%: Common conventional maximum
Show the numbers as a table
| Milestone | Balance | When |
|---|---|---|
| Today | $320,000 | 81.01% |
| 80%: request PMI cancellation | $316,000 | 14 months |
| 78%: PMI ends automatically | $308,100 | 3.2 years (38 months) |
Formula
LTV = Loan amount ÷ Lower of price and appraised value × 100Assumptions
- Conventional loan. FHA mortgage insurance follows different rules.
- Timelines use scheduled payments only; extra payments or a new appraisal can shorten them.
- The 80% and 78% points are from the Homeowners Protection Act (CFPB summary).
Closing Costs vs. Down Payment
The portion of the purchase price paid upfront in cash — reduces how much you finance.
Separate fees — lender charges, title insurance, taxes, recording fees — required to finalize the transaction, typically 2-5% of the purchase price.
These are two distinct cash requirements a buyer needs at closing — budgeting for one without the other is a common first-time buyer mistake.
Compare and common questions
Related Terms
More Buying Terms
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
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