A down payment is the amount of cash you provide for the purchase of a home. This is in contrast to the amount of money you borrow to buy a house. For example, imagine a house costs $100,000. This means that you must pay the seller $100,000. Further imagine that you have $20,000 in your savings account, but need an additional $80,000 to cover the full $100,000 price. In this example, the $20,000 you pay of your own money is the down payment. Your mortgage loan would cover the remaining $80,000.
Having a higher down payment can reduce your interest rate, and because the amount you need to borrow is lower, your monthly payments and the total amount paid for interest will be lower.
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