Conservative investors take more risk?

Conventional wisdom has it that conservative investors are more likely to save up a solid downpayment in the neighbourhood of 25% of the value of the home before jumping into the real estate market, while riskier people are the ones who sign up for no-money-down, 35-year mortgages and the like.

But an interesting post out there in the pfblogosphere is aiming to try to turn that notion on its head.

This post makes the contention that truly conservative investors are in fact more likely to go for 0% downpayment options, where the purchase price of the home is 100% paid for by the bank.

Basically, the argument is that in 100% financing deals, the bank is the one swallowing 100% of the risk -- both that the buyer won't be able to pay off the mortgage, and that the value of the asset will depreciate.

The reality is the conservative financing option is 100% financing. You have pushed all risk to a third party -- the bank! In doing so, you remain completely liquid -- the true goal of a conservative investor.

I'm not sure I buy the argument myself (the author's job as a mortgage broker clearly gives him an agenda that colours his opinion, IMHO) but it's certainly an interesting viewpoint.

My own nature tells me the best plan is to save up a significant amount of the purchase price for a downpayment, as a hedge against some calamity happening later on -- like losing a job, having to move, or a real estate crash.

So that's what I'm doing. Apparently that makes me a risky investor. :)