Home is your safe place. You long to get home whether you have had a good or bad day. You create several memories in your home. So, it holds an emotional significance. It is also a valuable financial investment. It assures the financial security of you and your loved ones in the present and the future. Before, the dream of buying a home seemed unattainable.
Today, you can realise your dream of buying a house by applying for a Home Loan. You can get a significant Loan amount at a competitive interest rate for a flexible tenure. It is a simple and affordable financing option.
What is Home Loan down payment?
As per the Reserve Bank of India, banks cannot extend 100% financing under Home Loans. The financing provided depends on your property value. The following table shows the maximum financing you can avail of:
Property value
Home Loan offering
Up to Rs. 30 lakh
Cannot exceed 90%
Between Rs. 30 lakh to Rs. 75 lakh
Cannot exceed 80%
Above Rs. 75 lakh
Cannot exceed 75%
Suppose you plan to buy a home worth Rs. 30 lakh. As mentioned in the table, you can apply for a maximum financing of 90%. This means you need to arrange the remaining 10% financing by yourself. This is called a down payment. You need to pay them upfront when applying for a Home Loan from any bank or financial institute.
How do down payments impact repayments?
Home Loan down payment impacts repayment in several ways. You should try making a higher down payment. It helps in the following ways:
- Lower dependency on borrowed funds – When you cover a reasonable part of your property value, you become less dependent on borrowed funds. This ensures that you do not experience financial stress.
- Meet the Loan eligibility criteria – Make sure to meet the bank’s eligibility criteria before applying for any Loan. The bank primarily considers your repayment capacity for Loan approval. When you pay a higher down payment amount, your Loan amount requirement decreases. The bank becomes confident that you can repay the lower Home Loan amount, so it gets approved.
- Lower interest rates – The bank offers interest rates based on your Home Loan amount. A lower Loan amount attracts lower Home Loan interest rates and vice-versa. You should make a higher down payment to reduce your interest liabilities.
- Shorter repayment tenure – Generally, the more significant the Loan amount, the more time it takes to repay it. As mentioned, when you make a higher down payment, your Loan amount decreases. You can repay the Loan amount in a reasonable time.