What Is Margin Money in Home Loans

26 December, 2024

Synopsis

• Margin Money is typically a 20% down payment paid for the purchase of a property, covering the portion that the bank doesn't finance.
• Banks finance up to ~80% of the purchase price of a home when you take out a Home Loan.
• You can save early, budget wisely and liquidate assets if needed to be able to pay Margin Money.

Opting for a Home Loan when purchasing or building a home can be a convenient option. However, even after obtaining a Home Loan, you still must pay a portion of the entire cost of your property as “margin money”. Banks typically will lend you money to cover up to a certain percentage of the property value’s cost. A portion of the expense is anticipated to come from your own pocket. Make sure you fully understand the idea of margin money in a loan before applying for a Home Loan.

What is Margin Money in Home Loans?

Banks will finance up to ~80% of the purchase price of a home when you take out a Home Loan. At least ~20% of the total price must be paid up front by you. This cash upfront is referred to as "down payment" or "margin money."

The market value of your home, the tenure of the loan and the total amount of your home loan all affect how much margin money you must pay. The margin amount varies based on the stage of construction if you are building a house with a Home Loan.

Let’s say you wish to apply for a ₹1 crore Home Loan from HDFC Bank. Depending on the size of the loan, HDFC Bank will require you to contribute between 10% and 25% of the total cost of the property. This means that you can use the Home Loan to cover 75–90% of the cost of the property. Apply for an HDFC Bank Home Loan today.

Margin Money Requirements: How to Arrange it?

To finance the down payment and raise money before your Home Loan application is accepted, here are some essential tips.

• Save Early

Saving money early on is one of the simplest methods to raise money for a down payment. Saving money will assist you in developing a sizable corpus over time.

• Prepare a budget

It is critical that you create a budget for your costs and closely monitor your monthly spending while you are saving for the down payment. Next, you can attempt to cut back on unnecessary spending. You can stay debt-free and grow your money by doing this.

• Liquidate Savings

You can liquidate some of your savings or assets depending on how much you need to raise for the down payment. These could consist of your Bank Fixed Deposits, Mutual Fund Investments, etc.

Here are some additional tips to help you secure a smaller down payment.

What Is Margin Money Receipt?

Once you pay the Margin Money for the home loan, the lender issues a receipt for that amount. That is the Margin Money receipt.

Apply for Home Loans at HDFC Bank

With HDFC Bank, you can start your Home Loan application process online and get access to features like hassle-free documentation and quick processing time. You can use our calculator tools to estimate your eligibility, EMI values, home-buying budget and more. Whether you want to purchase, build, renovate or extend your home, HDFC Bank has you covered.

Get started here.

*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.