Down Payment for a Home: How Much Should You Plan for, and How Do You Save It?
Our real estate agency in Paris's 16th arrondissement tells you more about the importance of a down payment and helps you determine the ideal amount to set aside.
What is a down payment on a mortgage?
A down payment is the amount of money you Invest your own funds in your real estate project, in addition to the bank loan.
This amount is generally used to cover incidental expenses related to the purchase: notary fees (which account for about 7 to 8% of the purchase price for an older property), bank processing fees, loan guarantee fees, and other expenses associated with your mortgage.
Having a down payment reassures lenders of your project’s financial stability and demonstrates your personal commitment to purchasing the property.
Why do banks require a down payment?
A substantial down payment sends a strong signal to lenders. It demonstrates the seriousness of your commitment, the viability of your project, and the stability of your financial situation.
Having a substantial down payment offers you several advantages:
- A higher chance that your loan application will be approved;
- The ability to negotiate more favorable credit terms, including a lower interest rate;
- Potentially higher borrowing capacity, allowing you to purchase a property that better suits your needs.
What is the recommended amount for a personal contribution?
Legally, there is no minimum down payment required to obtain a mortgage. However, it is customary to set aside a down payment representing at least 10% of the purchase price. This amount covers notary fees, application fees, and guarantee fees, which are unavoidable expenses when purchasing real estate.
Good to know: Some banks may even require a larger down payment—sometimes as much as 30% of the purchase price—particularly for first-time homebuyers or borrowers considered higher risk.
How do you save up for a down payment on a home?
There are several options available to you for making your down payment:
- The Home Savings Plan (PEL): The PEL offers attractive interest rates and a bonus if you use it to finance a real estate project;
- The Home Savings Account (CEL): Although it offers lower returns than the PEL, the CEL still allows you to set money aside with more flexible withdrawal terms;
- Selling a Property: If you already own a home, selling your current property may be a capital gain used to finance your down payment;
- Inheritance: An inheritance can also be a significant source of funding for your down payment.
A Contribution from Family: You can also ask your family members for financial support. However, it is important to document this contribution in writing to avoid any disputes.
