The larger a mortgage is, the larger the risk to the lender so to offset this risk, lenders will use something called a “sliding scale” to calculate the minimum down payment required. If the purchase price is over $1-million, the minimum down payment will be 20%. However, once you get around the $1.25-million mark, most lenders implement this sliding scale calculation when determining the minimum down payment and mortgage amount. The sliding scale varies by lender but usually they will lend 80% on the first $1-million and then 50% on the balance.
Here is an example:
| Purchase Price: | $ 1,400,000 |
| Lending value: | |
|
80% on the first $1.25-M |
1,000,000 |
|
50% on the balance ($150K) |
75,000 |
| Total Loan Amount |
$ 1,075,000 |
| Down Payment Required | $ 325,000 |
If you have any questions about how the sliding scale works, please don’t hesitate to contact our office!