How Much Down Payment Should I Require?

There is no single right percentage. Start with the funds needed at closing, then separately evaluate whether the remaining loan is an acceptable risk.

Explore my sale scenarios

Start with cash—not a percentage

The buyer’s down payment is not the amount that necessarily reaches your pocket. Existing debt, transaction expenses and taxes may consume a substantial portion before you receive spendable proceeds. A percentage that looks attractive in an offer can still leave your closing cash goal unmet.

Write down your intended sale price, current debt payoff, minimum net cash requirement and anticipated transaction expenses before negotiating a note. Obtain a lender payoff statement rather than relying only on the principal balance: accrued interest, prepayment charges and release costs may change the total.

Build a closing cash worksheet

An illustrative starting equation is: down payment less debt payoff, closing costs and closing-year taxes equals cash to the seller. The tax component is not necessarily fixed. In an eligible installment sale, the timing of gain recognition can depend on principal received, while special debt and recapture rules may require current-year recognition.

For example, a hypothetical $1,000,000 sale with a $250,000 debt payoff, $30,000 of estimated costs and a $200,000 cash goal needs $480,000 at closing before taxes. That is 48% of this assumed price, not a recommended down payment. If taxes or other costs increase, the required cash increases too.

A feasible cash goal is not loan approval

A down payment that satisfies your cash goal can still leave a poorly supported seller note. Review the buyer’s remaining liquidity, property cash flow, collateral, other financing, experience and repayment strategy. A buyer who spends every available dollar at closing may lack money for repairs, vacancy or unexpected expenses.

Similarly, an estimated loan-to-value ratio based on your desired sale price is not an appraisal. A larger down payment reduces the initial amount financed but cannot eliminate default, property deterioration, lien or enforcement risk.

Balance cash today with the note tomorrow

More cash upfront leaves a smaller seller-financed balance. Less cash upfront leaves more capital exposed to the buyer over time. Monthly payments depend on the note amount, rate and amortization, not just the down payment percentage. A fully amortizing note, a longer-amortization balloon note and an interest-only note can produce very different payment patterns.

Consider how a missed payment or delayed balloon would affect your personal obligations. If you need all sale proceeds immediately, seller financing may not fit. Do not assume you can sell the note later for its face value; future liquidity is uncertain.

Use the tools, then request review

Structure My Sale™ works backward from sale price, debt payoff and a cash goal to illustrate potential down payments and payment structures. Unknown tax inputs leave after-tax results provisional rather than silently treating taxes as zero. The Seller Financing Calculator evaluates payments when you already have proposed terms.

Take the output to SMC for a transaction review and to your CPA and attorney for tax and legal review. The tool’s minimum is a cash-planning estimate, not a minimum acceptable credit standard or a promise that a buyer can fund the closing.

Review your transaction

Bring your property, cash goals and proposed terms to Seller Mortgage Capital for an independent transaction review.

Review My Transaction With Seller Mortgage Capital