30 JUNE, 2021

In India, as per Reserve Bank of India (RBI) guidelines, banks can lend only up to a certain limit on the purchase cost of a property. Therefore, by applying for a home loan, you can finance up to 75-80% of your property purchase, whereas the remaining 20-25% has to be paid by you in the form of a down payment. While there’s no way to bypass the down payment, there are certain ways through which you can arrange funds for the same.

Mentioned below are some of the common ways of arranging money for the down-payment of your property:

  • Take an unsecured loan
    If you don’t have enough funds for down payment, an unsecured loan can come to your rescue. For example, if the value of your property is Rs 50 lakhs, and you manage to get a home loan of Rs 40 lakhs, you can avail a personal loan of Rs 10 lakhs to arrange money for the down payment. A decent credit score of 750 or above will help you avail both home loan and personal loan at an attractive interest rate. Thus, try to improve your credit score before applying for any kind of loan.
  • Borrow from your friends or family
    It’s no secret that buying a house is an expensive affair. It would be a blessing if your friends or family members offer a helping hand. Check if they can help you with the down payment. It’s an easy way of arranging funds and can save both time and energy.
  • Utilize your investments
    It’s always better to start investing early because a good investment portfolio can help you in many ways. You can pull up funds from your investment to take care of the down payment. Moreover, you can also consider availing a loan against fixed deposits or mutual funds for arranging the required amount for down payment. As these would be secured loans, the interest rate offered will likely be lower than an unsecured personal loan. Consequently, the repayment burden will also be lesser.

  • Take a loan from your employer
    Quite a few employers offer general-purpose loans at low interest rates to their employees. The process of availing such loans is usually hassle-free and requires minimal documentation. In case your employer offers such a facility, you can make use of it to arrange funds for the down payment of your property. Your relationship with the employer and tenure served in the organization may play a crucial role in such cases.

    By making a large down payment and borrowing a lesser amount, you can reduce your loan repayment burden to a great extent. Ensure to settle for a tenure that suits you the best. This will make sure that your home loan EMIs are affordable and reduce the chances of a default. At Kotak Mahindra Bank, you can avail a home loan with flexible repayment tenure and attractive home loan interest rates. So why wait? Apply for a home loan and take your first step towards purchasing your dream property, today.

Additional Read: Should You Take Another Loan to Arrange for Home Loan Down Payment - Explained!

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.