What does margin money mean in home loan?
Margin money is the down payment you make towards the total cost of the house. Lenders finance only up to 80% of the property’s total cost and the rest remains as margin money. Lenders treat this upfront payment as a sign of commitment, and a large payment reduces the lending risk.
Lenders decide the amount of margin money required based on factors such as the following.
- Market value of the property
- Tenor of the home loan
- Total home loan amount
- Opportunity cost
Margin money for loans for properties under construction depends on the stage of construction of the property.
What is margin money receipt?
Once you contribute the margin money for the home loan, the lender issues a receipt for the amount. That is the margin money receipt.
How to arrange for margin money for home loan
There are several ways you can arrange for the margin money for home loan financing
- Liquidate part of your savings
- Avail a loan on savings
- Take a soft loan from your employer (for lenient terms and a lower interest rate)
- Opt for a top up loan on a home loan
Also Read: What is down payment in home loan?