Living is our own house is the dream that every individual nurture. Usually, people opt for Home Loan as paying the whole cash up front is not possible.


Banks and NBFCs require some money to put as “Down Payment” as they do not offer the whole amount required.  It is simply the difference between the total amount required and loan amount.  It acts as the basis of customer’s commitment to complete the loan and indicates loyalty in paying the loan.




Importance of paying down payment:


  1.  It shows the applicant’s credit worthiness
  2. It acts as insurance for bankers as if the applicant defaults, then he/she loses both the down payment and property.
  3.  It assures that banks are protected from reduction in Interest Rates since the money that they give is lower than the market value of the  house. Hence, if there is a drop,  they can still recover the losses.
  4. It ensures that the customer has some stake in maintaining the property.


Also Read: Tips on Your Down Payment


Here are some essential points regarding down payments:


Amount of down payment: Usually the down payment that you need to pay is around 15-20 per cent.


Limit of the down payment: The banks and companies have not set any upper limit for down payments as it all depends upon your capability to arrange funds. If you pay more money, then it reduces the loan amount that you require. It is always better to pay high down payment as it reduces the burden of money that you have to pay over the term of the loan.


Age of the property affects down payments:  Banks refuse to finance the property that is older in age. In such case, the down payment increases. You need to search for the property that is not so older in case you cannot pay more than 20 percent as down payment.


Zero-down payment:  There are also options for getting “Zero Down payment” loans, but it all depends upon your credit history. Availing such scheme looks very attractive, but it compels you to borrow a big amount, which further increase the burden of higher EMIs.


Down payments do not include other costs: Down payment is free from other charges like registration charges, property taxes, stamp duty costs, and transfer charges.