Buying a new property can seem like a tedious task to a first-time buyer in the real estate market. However, opting for housing finance can make your job a lot easier. Before applying for a loan, you must know the different elements involved in the loan application, sanction, and disbursal process.
And one such factor that plays a significant role in borrowing finance is margin money! If you don’t know what is margin money, read further to find out.
What is Margin Money in Home Finance?
Mortgage finance only covers about 70 to 90% of the property’s total price. And, the borrower pays the balance amount to the financial institution during application. This is called margin money. It is also referred to as the down payment for home loan and is a crucial part of home finance.
The percentage of margin money can vary from lender to lender, but it is usually between 10% and 25%, depending on the total loan amount. It also depends on the property’s market value and the loan tenure. The margin money or down payment lowers the risk factor for the lender and acts as a sign of trust.
Furthermore, a higher amount of margin money lowers your repayment obligation and monthly EMIs. Therefore, having funds saved up for the down payment means half the battle is won. However, if you are unable to do so, there are a few simple methods to arrange it to buy your desired property.
Additional Read: Know about Margin Money in Home Loans
How to Arrange Margin Money to Purchase a Property
Now that you know what is margin money in home loan, here are a few ways you can arrange it to purchase your next property.
Liquidate your savings
One way to arrange funds for margin money is to liquidate some of your current savings. This may include financial instruments such as fixed deposit accounts, mutual funds, etc.
Make a budget and start saving
Start monitoring your monthly expenditure and keep track of all the miscellaneous expenses. You must allocate a monthly budget towards your down payment. It may take months, so you must start saving early.
Take a personal loan
You can also avail of a personal loan to help you pay off the margin money on your home loan. But time your loan application carefully and opt for a loan with flexible repayment terms. Besides, assess your financial condition to ensure you can service two loans simultaneously.
Borrow funds from family
Lastly, you can also seek funds from your friends or family. This is the easiest way to raise your down payment, and you can repay them when you can.
Additional Read: Best Tips to Plan Your Down Payment for Home Loan
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You can even evaluate your EMIs by using our online home loan EMI calculator. So, quit waiting any longer and visit our website to know more!
