Are you wondering if you should pay 20-25% of Property cost while taking bank loan or can you pay less if you don’t have enough money for the down payment ? Well, this seems to be a trivial question but actually it is important understand as it influence the amount that you are going to pay and how this can often cause trouble to you. Usually, when we approach bank for the home loan or property loan, there is rule that we can only take 70-75% of Property cost as loan and the rest we need need to pay as down payment.
But many times when you don’t have enough money for down payment then you might request your builder or developer from whom you are buying the property to accept some lesser amount and make the rest as bank loan. Most of the time, your builder or developer will agree on that as they have to sell the property without telling you the whole truth or explaining what would happen if you don’t pay the expected down payment.
Why you should pay 20-25% of Property cost while taking Bank Loan?
Here I am going to explain you the truth behind that and what would happen if you pay lesser amount which no builder or developer would care to explain you. Let’s assume that you are going to buy a property which costs around Rs60 lakhs and you are taking a bank loan for that in which you are expected to pay 25% as down payment and rest will be loan from the Bank. It means you are suppose to pay Rs15 lakhs as down payment. But let’s assume that you don’t have enough money to pay the entire down payment and only able to pay Rs10 lakhs.
If you tell this problem to your developer or builder, then they will immediately say that they will take care by making all the remaining amount, that is Rs50 lakhs on bank loan and you will be very happy. But wait, here is one important point to understand. Bank will follow their rule under all circumstances. So if you are demanding Rs50 lakhs loan from Bank, then the contact person from bank has to make your Rs50 lakhs loan as 75% as per the bank rule. Now according to this rule 25% becomes around Rs16.67 lakhs. This is the down payment for which you need to show the margin money statement.
At this time you will feel you are stuck as nobody told you about this and loan process has already started and the bank is asking you to show the transaction of Rs16.67 lakhs to the developer or builder. Immediately you will feel cheated as your property values increased from Rs50 lakhs to 50+16.67 = Rs66.67 lakhs. Now you have to vent out Rs6.67 lakhs additional money which you probably don’t have.
Not just that, if your total property value goes beyond a certain limit then they will ask you to pay few extra charges as well. You might also need to pay higher interest charges depending on your CIBIL score and other criteria’s.
This is exactly why you have to pay 20-25% of down payment(depending on the bank) and avoid this hazzle even if no one told you about this. You should never get into trap of builder or developer and reduce the down payment as later even if you manage to show the remaining amount in your bank statement, you may need to cough up extra money in the name of admin charges and other hidden charges. That time you would probably wish it would have been better to make the designated down payment instead of going through all this trouble. Hope you got the point.