It seems counter intuitive that a person with 5% down be offered a lower rate than someone with 20% down. Clearly the second person appears to be much financially stronger. Either they have sold an asset like a home or they have saved extra funds or through some other means they have 20% or more to put down. Or maybe this is existing equity already in place after years of mortgage repayments. This savvy consumer goes to apply for a mortgage after having researched the lowest rates only to be told when they get the approval that those very low rates are only for people with less than 20% down. That seems ridiculous really as the person with more skin in the game, so to speak, is less likely to default on their mortgage and lose that substantial equity stake. It is true nonetheless so let’s take a look at why.