QUESTION: Down payment: how does the down payment affect the interest rate and approval?

The size of the down payment has a direct and decisive impact both on the likelihood of mortgage approval by the bank and on the amount of the future interest rate. Financial institutions view the down payment amount as an indicator of your solvency and level of financial discipline.

To assess your capabilities and minimize risks, it is extremely useful to pre-calculate a baseline scenario where your income remains stable, as well as a stress scenario in case of a temporary job loss or a drop in earnings.

Be sure to set aside a financial cushion of 10–20 percent above mandatory expenses for unforeseen circumstances so as not to find yourself in a vulnerable position after completing the transaction.

It is also important to decide in advance which expenses and secondary contributions you are ready to cut first in order to achieve the main goal of purchasing real estate.

The larger the amount you are ready to contribute from your own funds when applying for a mortgage, the more loyal the bank will be, since the risk of loan default decreases and the ratio of the debt amount to the collateral value drops.

A large down payment often allows you to count on a lower interest rate on the loan, which in the long run will save you hundreds of thousands or even millions of rubles in interest payments.