A home loan may be your big step towards your dream home. To be eligible for a home loan, most of the lenders demand borrowers to pay a small portion of the loan amount upfront and this is called home loan down payment. The portion of the home loan you have to fund is calculated based on your eligibility and the minimum will be 10% of the total principal amount.
According to RBI, the banks and NBFCs in India can only provide 80% of the property value as a home loan for loans above the amount of Rs. 30 Lakhs. The rest should be funded by the borrower themself. For amounts lower than Rs. 30 Lakhs, the lenders provide 90% of the property value and the borrower has to pay 10% as the down payment for the home loan. This may vary according to the property value. As the property value increases, the home loan down payment percentage also increases.
Let us take a look at the details of the home loan down payment here.
Here are the features and benefits of home loan down payment.
Lower interest rates: If you pay a minimum down payment for a home loan, you will get a reasonable housing loan interest rate. This will significantly reduce the EMI and the total interest payout.
Builds trust between borrower and lender: When you pay the down payment on a home loan, it comforts the lender and makes them trust you more. The home loan down payment decreases the risk and increases the repayment chances.
Long tenure stretch: If the down payment required for home loan is paid on time, it will help you get a longer loan tenure from the lender.
Lower processing costs: Lenders will be willing to provide lower processing charges if you pay a good amount as down payment to buy a house.
Easy Approval: When you make a down payment, it shows you have a higher chance of repayments, and hence, it results in an easy home loan approval.
The minimum down payment for a home loan will be 10% of the property value.
No, banks can’t give 100% home loans. According to RBI, the banks and NBFCs in India can only provide 80% of the property value as a home loan for loans above the amount of Rs. 30 Lakhs.
You can arrange your down payment on a house in various ways. Some of them are:
Saving up money from the beginning of your career
Utilising the investments you made or taking a loan against them
Avail of a personal loan
Choose the proportionate release option and pay the down payment in instalments
Take help from your organisation, family or friends
Ideally, you cannot get a home loan without paying a down payment. However, you can take appropriate measures to reduce the burden of down payments.