Home down payment:
what you pay on day one and what it leaves you to borrow

What the down payment actually covers

The down payment is the part of the property price you pay from your own money, so that the lender finances only the rest. Whatever you do not put down becomes the loan principal, and a bigger principal means a bigger EMI and more interest over the term.

Two ideas often get blurred. The down payment is a share of the agreed price, while the total cash you need on the day also includes registration, stamp duty, brokerage, legal checks, society transfer fees and sometimes processing charges. Those extras are not part of the loan and are usually not financed.

Buyers often anchor on the percentage and forget the rupee amount that sits next to it. A 20% deposit sounds modest until it is written as ₹12,00,000, which is more than a year of savings for many households. Writing both forms side by side keeps the plan honest.

The down payment formula

The same relationship works in reverse. If you have ₹15,00,000 saved for the deposit and a bank will lend up to 80% of the price, the largest price you can target is ₹15,00,000 ÷ 0.20 = ₹75,00,000, before counting the extra costs.

Under-construction properties add another wrinkle, because the builder may collect the price in stages linked to construction milestones. The bank then releases the loan in matching tranches, so your own contribution is usually paid first and the loan follows, which means the deposit is needed early in the project.

Worked example: a ₹60,00,000 flat

Now add the costs on top. Suppose stamp duty and registration in your state come to 6% of the price, which is an assumption for this illustration only. That is ₹3,60,000, so the cash you need before moving in is ₹12,00,000 + ₹3,60,000 = ₹15,60,000, plus brokerage and any legal or interior costs.

A sensible habit is to work backward from the budget as well as forward from the price. Decide the highest EMI you can carry comfortably, convert it into a loan amount at the current rate, and then add your available deposit. That total is the property price you can actually afford, which is often lower than the figure the first listing suggests.

How the percentage changes the picture

A larger deposit lowers the EMI and total interest, but it also drains savings that may be needed for the emergency fund, furnishing and moving costs. Many buyers keep the deposit close to the minimum and put spare money into a buffer.

What the deposit does to the monthly instalment

The loan left after the deposit drives the EMI directly, so it helps to see the monthly figure next to each percentage. The figures below assume an interest rate of 8.5% a year over 20 years, which is only an example; use the rate your lender quotes.

Moving from 10% to 30% takes about ₹10,400 off the monthly instalment and roughly ₹13 lakh off the interest paid over the term. Whether that is worth locking in ₹12,00,000 more cash on day one depends on what else the money would do for you, such as clearing a higher-interest debt first.

Why the lender sets a minimum

Banks lend against a loan-to-value (LTV) ratio, which is the loan divided by the property value. Regulators in India cap LTV in bands that depend on the loan size, with a smaller maximum share for larger loans, so the minimum deposit rises with the price band. The exact bands are revised from time to time, so confirm the current ones with your lender.

Banks also base the loan on the lower of the agreement value and their own valuation. If the valuer pegs the flat at ₹57,00,000 against a price of ₹60,00,000, the loan is calculated on ₹57,00,000 and the gap falls on you.

Where the deposit money should come from

Lenders want the down payment to come from your own resources, and they may ask for bank statements showing where it came from. Savings, maturing deposits, a gift documented by the giver, or a withdrawal from a retirement fund within its rules are the usual sources. Rules for provident fund withdrawals have conditions of their own, so confirm them before counting on that route.

Borrowing the deposit through a personal loan is generally a bad idea. It adds a second EMI at a higher rate, and it can reduce the home loan you qualify for because lenders count every existing obligation against your income.

• Open a separate account for the house fund so the balance is easy to track.
• Keep the money in something safe and liquid if you plan to book within a year.
• Leave a cushion of several months of expenses outside the deposit.

Mistakes to avoid before booking

• Counting the booking amount as a separate payment: it is usually adjusted inside the down payment, not added to it.
• Forgetting that part of the cost may be paid in the builder's linked instalments, so cash needs arrive in stages.
• Using the whole savings pot, which leaves nothing for the first few EMIs if income dips.
• Treating the quoted price as the agreement value when parking, club membership or floor-rise charges are billed separately.

Keep every payment receipt and make sure the builder or seller records each amount against the agreement. Disputes about how much was paid before the loan was sanctioned are common and are easy to avoid with a clean paper trail.