Down-payment ratio
The down-payment ratio is the percentage relationship between the borrower's personal contribution and the total cost of the real-estate transaction (purchase price plus acquisition costs). It measures the self-funded share of the deal and is a key indicator of file strength for the lender, which uses it to gauge its net exposure in the event of default.
Key points
- An upfront contribution covering at least the acquisition costs (notary, guarantee, brokerage) — roughly 8–12% for older properties — is the baseline most banks require.
- A down-payment ratio of 20% or above significantly improves lending terms (interest rate, insurance requirements).
- 110% financing (zero down) remains possible but is reserved for very strong profiles or rental investors.
- The origin of the down payment (personal savings, gift, profit-sharing) must be documented.
- Down-payment ratio should not be confused with LTV (loan-to-value): the former is based on total cost, the latter on property value.
Frequently asked questions
Can a family loan be counted as part of the personal down payment?
A family loan can in principle contribute to the down payment, but if repayments are scheduled it will be counted as an additional liability in the debt-to-income calculation. Lenders prefer an outright family gift, which does not add to monthly debt obligations. If the family loan is interest-free with no formal repayment schedule, some lenders treat it like a gift and include it in the down payment without penalizing the DTI ratio.
Why does the bank require documentation proving the origin of the down-payment funds?
Documenting the origin of funds is an AML/CFT (anti-money laundering / counter-terrorism financing) legal obligation. The lender must ensure the invested funds do not derive from illicit activities. In practice, the borrower presents recent savings account statements, a notarized gift deed, a profit-sharing plan document, or any record tracing how the down payment was accumulated.
What is the difference between the down-payment ratio and the LTV (loan-to-value)?
The down-payment ratio divides the down payment by the total transaction cost (price plus fees). The LTV is the ratio of the loan amount to the property's market value alone. A property bought for €200,000 with €10,000 in fees and €40,000 down yields a down-payment ratio of 18.9% (40,000 / 210,000) but an LTV of 85% (170,000 / 200,000). Both metrics coexist in the lender's analysis.
In practice
A first-time buyer wants to purchase an apartment for €220,000 in an existing building. Notary and guarantee fees total €18,000, giving a total cost of €238,000. She has €35,000 in savings. Her down-payment ratio is 14.7% (35,000 / 238,000), which covers ancillary costs with a small margin. Her broker advises her to keep at least €5,000 as emergency savings and to borrow €203,000.
Official sources
- Obtaining a mortgage loan · Service-Public.gouv.fr
- Mortgage credit (official guide) · Service-Public.gouv.fr