In a nutshell, a home loan down payment is a sum of money paid upfront when buying a house. As per RBI’s guidelines, homebuyers must finance 10-20% of the property cost as a down payment. The rest of the property cost, i.e. 70-80%, is funded by the lender.

Your down payment amount does not cover any additional charges, including home loan processing fee, stamp duty, property tax, etc. Therefore, along with the down payment, you must pay for these charges from your pocket.

The total down payment a homebuyer makes also impacts factors like –

• Home loan eligibility
• Loan-to-value ratio
• Interest rates
• House loan EMI

A down payment is a substantial amount to pay. Therefore, homebuyers must remain vigilant when calculating the down payment, to make the most of their home loan.

Here are some of the most common mistakes to avoid when making your home loan down payment.

Miscalculating the Down Payment

For property under construction, lenders may disburse the home loan amount in instalments. Even so, you must pay the entire down payment amount before the first loan disbursement is made. However, many homebuyers miscalculate the home loan down payment amount and suffer from delays in loan procurement; consequently, delaying the home purchase. 

Always use a home loan EMI calculator to calculate the house loan EMI obligations on your stipulated loan amount. Accordingly, estimate a down payment amount and arrange for necessary funds.

Insufficient Funds for the Down Payment 

Unless you have a savings corpus, funding the home loan down payment can be tricky – especially since the down payment is a significant portion of the property cost; case in point: for a property valued at 90 lakhs, the down payment will be 10% of 90 lakhs, which is 9 lakhs.

If you lack adequate funds, your home loan eligibility will be lower, and your loan application may be rejected. Therefore, it is vital to have enough funds for the down payment before applying for a home loan.

Some common ways to procure funds for a down payment include –

• Personal loan
• A soft loan from friends or relatives
• Liquidating assets

How Much Down Payment to Make?

The lender usually specifies a minimum down payment amount. However, you can opt to pay a larger down payment as this improves your home loan eligibility, lowers interest rates, and also lowers the home loan processing fee.

However, if you wish to pay over the amount specified by your lender, decide an appropriate down payment amount based on your financial health.

The Bottom Line

Buying a house is a substantial financial decision to make. To ensure it goes smoothly, avoid making the mistakes mentioned above when preparing for your home loan down payment. This way, you can purchase your dream home faster.

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