How much down payment do you need for a home loan in India?

General information, not financial advice. The maximum loan a lender may give, and the charges you pay, are set by the central bank and by each lender, and they change. Ask your lender for the current figures. Every number below is an illustration, not a quote.

How much down payment do I need?

You need to pay the part of the price that the lender will not finance, plus the one-time costs of buying. A lender lends only up to a share of the property's value, called the loan-to-value ratio, and the central bank caps that share. The cap is lower for higher-priced homes, so a more expensive home needs a larger down payment as a share of the price. Ask your lender what it will finance for the home you want.

What is the loan-to-value (LTV) ratio?

Loan-to-value is the loan amount divided by the value of the property, shown as a share. If a lender finances four-fifths of a home's value, its LTV is four-fifths and you pay the remaining one-fifth yourself. The value used is usually the lower of the price you agree and the lender's own valuation, so a low valuation can raise your down payment.

What does the down payment have to cover?

• The part of the price the lender does not finance.
• Stamp duty and registration charges. See stamp duty and registration explained.
• Loan processing fees and any charges the lender asks for upfront.
• Brokerage, if a broker is involved.
• Society transfer, deposit or corpus fund payments in an apartment complex. See society maintenance charges.
• Moving, repairs and furnishing, which are not part of the loan.

How does the down payment change my EMI?

At the same interest rate and tenure, the EMI rises and falls in direct proportion to the loan amount. Borrow twice as much and the EMI is twice as high. A bigger down payment therefore lowers the EMI, and it also lowers the total interest you pay. The formula is in how a home loan EMI is calculated.

Example, for illustration only. Take a home priced at 5,000,000 rupees. With a down payment of 1,000,000 the loan is 4,000,000. With a down payment of 2,000,000 the loan is 3,000,000. At the same rate and tenure, where a 2,000,000 loan has an EMI of about 17,995, the first loan has an EMI of about 35,989 and the second about 26,992. Putting 1,000,000 more down lowers the monthly payment by about 8,997.

How big should my down payment be?

1. Start with the lender's minimum, which is the home's value less the most it will finance.
2. Keep an emergency fund aside. Do not spend all your savings on the down payment.
3. Check that the EMI fits comfortably in your monthly income, using the home loan eligibility calculator.
4. Try a few down payments in the down payment calculator and compare the EMI each gives, using the EMI calculator.
5. Only then decide how much to put down.

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