Borrowing a loan can seem like a challenging task, especially to a first-time homebuyer. After all, buying a property requires extensive planning as it is a significant financial commitment. Multiple factors come into play when you apply for a loan to finance your dream home. And one such factor is margin money! But what is margin money in home loan? Read on to find out.

Role of margin money

When applying for a home loan, the amount of money you pay to the lender as security is the margin money – or down payment as commonly called. It is the amount that the borrower contributes upfront to the loan amount. Borrowers generally pay up to 20% of the total property cost as margin money or down payment, while the rest of the property cost is financed by the lender. This way, the margin money acts as a sign of trust between the lender and the borrower.

Therefore, it is essential to allocate a budget and start saving the margin money before applying for a loan with a lender. This is because a higher down payment can help you reduce your repayment obligation and monthly EMIs in the future. Remember, your ability to contribute the required percentage of down payment, i.e., 20% of the property cost, will also affect your home loan eligibility.

Additional Read: Best Tips to Plan Your Down Payment for Home Loan

How to raise margin money

It can be challenging to raise the required margin money out of your pocket. Wondering how you can do it? Here are a few simple ways to raise funds for a down payment and finance the house of your dreams.

• Start saving early:

Ideally, one should start saving from the beginning of their career to build a saving corpus. When you keep a particular financial goal in mind, it can help you get some perspective and encouragement to save more.

• Make a budget:

It is vital to monitor your monthly expenditure and make conscious efforts to stay within a budget. Keep track of all your expenses, including both fixed and additional ones. You must also make efforts to reduce your impulse purchases and pay off any debts to increase your monthly savings.

• Liquidate savings:

Based on the requirement, you can raise funds for your margin money by liquidating some of your savings. These may include bank fixed deposits (FDs), mutual funds investments, etc. 

Additional Read: Home Loan Down Payment Advantages for Women

Final words

Are you still confused about what is margin money? Get in touch with Tata Capital and let our experts solve your doubts! We understand the importance of buying a house, which is why our loan process is completely hassle-free. You can also avail of attractive interest rates on our various housing finance options.

Moreover, you can access our digital banking services, including the home loan EMI calculator and online application process, for a smooth borrowing experience. Learn more about our housing finance at Tata Capital!

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