What is Down Payment?

A down payment is the upfront cash portion of a property purchase that the buyer contributes from their own savings, typically 10–25% of the price, with the remainder financed by a mortgage.

The down payment is your skin in the game. Lenders require it to ensure the property is worth more than the loan and to reduce default risk. The larger the down payment, the lower the loan-to-value ratio (LTV) and usually the better the interest rate.

In Switzerland, lenders require at least 20% down — of which at least 10% must be 'hard' equity (savings or pillar 3a, not pension fund withdrawal). Germany typically expects 10–20%; France often 10–20%; Italy 20–30% for first-time buyers, sometimes less with state guarantees.

Saving the down payment is the single biggest hurdle to home ownership for most Europeans. Pillar 3a (CH), Bausparvertrag (DE), PEL (FR) and dedicated savings products help — but the down payment usually represents 5–10 years of disciplined saving.

Example

Buying a CHF 1,000,000 apartment in Zurich requires CHF 200,000 down (20%). Of that, at least CHF 100,000 must come from personal savings or pillar 3a; the other CHF 100,000 can be drawn from your pension fund.

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Related terms

Mortgage

A mortgage is a long-term loan secured by real estate, used to finance the purchase of a home or commercial property, repaid in monthly instalments over 10 to 30 years.

Amortization

Amortization is the gradual repayment of a loan's principal through scheduled instalments, where each payment covers both interest and a shrinking share of the original balance.

Interest Rate

An interest rate is the cost of borrowing money or the return for saving it, expressed as an annual percentage of the principal amount.

Equity

Equity is ownership in an asset after all debts secured by it have been repaid; for a company it is the residual claim of shareholders, for a property it is value minus mortgage.

Frequently asked questions

Can I borrow the down payment?+

No — lenders require it to come from your own resources or pension. Personal loans for the down payment are not accepted.

Does a bigger down payment lower my rate?+

Often yes. Many lenders price LTV bands: below 65% LTV usually qualifies for the best rates.

Is the down payment refundable if the deal falls through?+

Generally yes during the financing-contingency period, less an administrative fee. Once you sign the deed, it is committed.