Down Payment

What It Means

A down payment is the portion of a property's purchase price that buyers pay upfront in cash at closing, with the remainder financed through a mortgage. Down payment requirements vary by loan program — typically ranging from 3% to 20% or more of the purchase price — and directly affect loan terms, monthly payments, and whether private mortgage insurance (PMI) is required.

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In co-buying, the down payment is a Capital Contribution that must be sourced, tracked, and allocated across multiple parties. How co-buyers split the down payment is one of the most consequential early decisions in the arrangement — it often informs Ownership Share percentages and shapes how Equity is distributed at exit.

How Down Payments Work for Co-buyers

Each co-buyer's down payment contribution may come from savings, gifts, or other eligible sources. Lenders require documentation of the origin of all funds — and when multiple parties contribute, the paper trail becomes more complex. If any portion of the down payment is a gift, a Gift Letter is required to confirm the funds are not a loan that must be repaid.

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Co-buyers do not have to contribute equally. One co-buyer may put up 70% of the down payment while another contributes 30% — or one may contribute nothing. What matters is that the group documents each party's contribution and agrees on how it maps to ownership percentage, equity allocation, and reimbursement at exit.

Why It Matters for Co-owners

An unequal down payment split — which is common — creates a structural question the group must resolve: does a larger down payment contribution translate to a larger ownership percentage, a senior equity position at exit, or simply a larger reimbursement before remaining equity is split? Each approach has different implications for Buyout calculations and Exit Strategy mechanics.

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The Co-ownership Agreement should document each co-buyer's down payment contribution, define how those contributions affect ownership percentage and equity allocation, and specify whether contributions are reimbursed off the top at sale or factored into proportional equity splits.

Key Points

• The upfront cash portion of the purchase price not covered by the mortgage
• Co-buyers do not have to contribute equally to the down payment
• Each contribution must be documented and sourced for lender compliance
• How the split maps to ownership percentage and equity must be agreed upon before closing
• Unequal contributions create structural questions about buyout and exit calculations
• The Co-ownership Agreement should define contribution amounts, ownership mapping, and exit reimbursement