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What is Minimum Down Payment on a Home Loan?

Updated: May 31, 2022
What is Minimum Down Payment on a Home Loan?

Down payment on a home loan refers to the upfront amount paid by the buyer in the early stages of buying a home or an expensive good. As per RBI guidelines, a lender can only provide up to 90% (maximum, depending on the borrower’s eligibility) as a home loan and the remaining amount should be paid by the home buyer.

How Much Minimum Down Payment for Home Loan?

To avail a home loan, you need to make the minimum down payment as prescribed by the lender. Depending on your credit score and behavior, the lender may ask to provide a higher home loan down payment.

One can also make a higher down payment while availing of a home loan. It offers numerous benefits, like:

  • You own higher equity in your house, thus lowering the dependence on borrowed funds to purchase the house.
  • You stand a chance to get a lower interest rate on a home loan and favorable terms and conditions.
  • It improves the chances of home loan application approval, as a higher down payment means lower credit risk for lenders.
  • It lowers the processing cost and insurance premiums on the home loan amount.

It's better to make a higher down payment while availing of a home loan, but it’s not wise to use your entire savings or take another loan to make a higher down payment. It can affect your financial stability and you stand to gain less from the tax benefits.

How to Save for Home Loan Down Payment?

The key to securing a home loan depends on how much down payment on a house loan you can make.

The following are the tips to save for a home loan down payment:

Start Early:

Purchasing a house is a long term process as you need to find a suitable property that is well within your financial capability. You can start saving for your house the day you decide to purchase one. You can build a down payment corpus easily.

Consider Proportionate Release Option:

Under this option, the lender allows you to make your down payments in easy installments over time rather than in lump sum mode. This mode of payment can be availed when the property is under construction.

Opt for a loan against PPF or life insurance policies:

You can consider taking a loan against your provident fund or life insurance policies and repay with your savings over a period of time. However, while availing of a loan, you should consider the impact on your finances.

In Conclusion

Down payment is an indispensable part of a home loan, and it is better to start saving for it early to minimize the impact on your finances when you actually avail of a home loan or decide to purchase a house.

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