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HOW TO PLAN MARGIN MONEY FOR HOME LOAN-Tips To Help Arrange For Down Payment Needed While Buying A Home

Updated on January 8, 2011

FINANCING YOUR DREAM HOME

Home Loans In India

Buying a home with a home loan is no doubt a major financial commitment on your part. It requires a good amount of financial planning. There are several benefits of purchasing a property with a home loan, but to avail of all the benefits, including saving on income tax, you need to be aware of your personal finances. And how you can use them to maximum benefit. It is mandatory for you to arrange your down payment (margin money) on your home loan before it can be sanctioned by the concerned bank.

How Much Margin Money Is Required For A Property In India

Borrowers are required to make a down payment (margin money) of at least 20 % of the property's value. Earlier, this margin money amount was between 10 and 15 %. The RBI (Reserve Bank Of India) has recently increased the margin money requirement for home loan borrowers, especially on those with property value above 20 lakhs. Depending on the bank you are availing your home loan from, you will be required to arrange for funds between 20 and 25 % of your property's value at the time of availing the home loan.

Ways To Arrange For Margin Money

Your Hard Earned Savings : Liquidating your savings is the easiest you can think of, but it is wise to set aside enough for contingencies. And take into account prematurity charges, higher returns expectations for the future,etc.

Loan On Your Savings : Instead of liquidating your savings, you can choose to take a loan on the savings to arrange for the funds needed. Loans available against savings instruments such as FD's(Fixed Deposit) varies between 50 and 75 % of its value. Some banks offer as much as 90 % so it is good to check with your bank. Also bear in mind that the rate of interest charged on a loan against savings instruments is higher than the returns on the instruments.

Loan From Your Employer : Employers often offer their employees soft loans which can be utilized for part of the margin money amount. This is definitely worth taking since most often the interest rate is low or nil. But, this will be adjusted in your monthly take home which you must be ready for.

Top Up Loan : This is offered by some banks to help you bridge the gap in funds for down payment. But, be aware that these come with a higher rate of interest and it could be a bigger financial burden.

Always, take your time in planning your margin money before you seek that home loan. Yes, that property you saw and fell in love with, may be gone tomorrow to another buyer, but you will be better off knowing how you will manage your finances and whether it is really within your reach. I believe strongly that if it has your name on it, you will surely be able to find the necessary finances, but you need to be smart in planning it out.

My Home Under Construction

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    • SEO Expert Kerala profile image

      SEO Expert Kerala 7 years ago from KERALA

      thank you so much purple pan for writing the hub on home loan. These types of hub are necessary for awareness of people who think to purchase home on loan basis. You had well described how to arrange for down payment and how much should it be and also how to collect the money for it which is very necessary to collect before purchasing the home

    • Pamela99 profile image

      Pamela Oglesby 7 years ago from United States

      I think this excellent hub gives some good information that I haven't seen on the other hubs. Where to get the money is a huge consideration.

    • SUSIE405 profile image

      SUSIE405 7 years ago from Delray Beach, Florida

      I am totally focused on saving enough money for a down payment. But I am very concerned about credit score, mine is not good.

    • Simone Smith profile image

      Simone Haruko Smith 7 years ago from San Francisco

      Thanks for writing this Hub! So many people focus on the interest aspects of loans that the concept of getting that necessary downpayment gets neglected.

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