Buying a home involves making several financial decisions, and one of the first is deciding how much to pay as a down payment. While many buyers may focus on the home loan ticket-size or applicable EMI, the down payment you make at the beginning can also influence your overall borrowing costs.

In this guide, we'll explain how a higher down payment affects your home loan, your EMI, and the total amount you repay over time.

What is a Home Loan Down Payment?

A home loan down payment is the part of a property's purchase price that you pay from your own funds. The bank finances the remaining amount through a home loan. The minimum down payment varies depending on the bank's policies, the property's value, and other eligibility factors.

How Does a Home Loan Down Payment Impact Your Loan Principal?

Your home loan principal is the amount you borrow from the bank after paying the down payment. It is calculated by subtracting the down payment from the property's purchase price.

For example, if a home costs ₹70 lakh and you take a loan of ₹50 lakh (if eligible and approved), then you pay a down payment of ₹20 lakh. In such a case, your loan principal will be ₹50 lakh subject to terms and conditions. The bank calculates your EMI and the interest you pay based on the principal amount. A higher down payment reduces the loan principal, while a lower down payment increases it.

Why Does a Higher Down Payment Lower Your Home Loan EMI?

A higher down payment reduces your home loan EMI, though not directly. It ensures you borrow less. When you borrow less, your loan principal becomes smaller. Since your EMI is calculated on the loan principal, your monthly repayment also decreases compared to a higher ticket-size loan.

A lower EMI can make your monthly repayments easier to manage and leave more room in your monthly budget.

Comparing Home Loan EMIs With Different Down Payments

The example below shows how changing the down payment affects the loan amount and EMI when the property price, interest rate, and loan tenure remain the same.

*EMI calculations are indicative, rounded off, and subject to change based on applicable interest rates and loan terms.

Disclaimer: The data generated herein is completely and solely based on the information/details provided by you and such information and the resultant data is provided only for user's convenience and information purposes. Ujjivan SFB does not guarantee accuracy, completeness or correct sequence of any the details provided therein and therefore no reliance should be placed by the user for any purpose whatsoever on the information contained / data generated herein or on its completeness / accuracy. The use of any information set out is entirely at the User's own risk. User should exercise due care and caution (including if necessary, obtaining of advice of tax/ legal/ accounting/ financial/ other professionals) prior to taking of any decision, acting or omitting to act, on the basis of the information contained / data generated herein. Ujjivan SFB does not undertake any liability or responsibility to update any data. No claim (whether in contract, tort (including negligence) or otherwise) shall arise out of or in connection with the services against the bank. Neither Ujjivan SFB nor any of its agents or licensors or group companies shall be liable to user/ any third party, for any direct, indirect, incidental, special or consequential loss or damages (including, without limitation for loss of profit, business opportunity or loss of goodwill) whatsoever, whether in contract, tort, misrepresentation or otherwise arising from the use of these tools/ information contained / data generated herein.

Can You Make a Higher Home Loan Down Payment Than the Minimum Required?

Yes, you can usually make a larger down payment than the minimum required by the bank. Paying more upfront reduces the amount you need to borrow, which can lower your EMI and the total interest paid over the loan tenure.

Before deciding on a higher down payment, make sure you have enough savings to cover other home-buying costs, such as registration charges, taxes, and moving or furnishing expenses. It is also a good idea to keep an emergency fund for unexpected expenses.

How to Choose the Right Down Payment?

The right down payment depends on your financial situation and long-term goals. While paying more upfront can reduce your loan amount, it is also important to keep enough savings for other expenses.

Before deciding on your down payment, consider the following:

• Set a savings goal before applying for a home loan
• Keep enough money aside for registration charges, taxes, and home furnishing expenses
• Maintain an emergency fund instead of using all your savings for the down payment
• Compare different down payment amounts with a home loan EMI calculator to understand how they affect your monthly EMI and the total interest paid
• Choose a down payment that fits your budget and repayment capacity

Final Thoughts

Before deciding on a down payment, compare different loan scenarios and choose an amount that fits your budget and long-term financial goals. A well-planned down payment can help you manage your home loan more comfortably from the start.

Disclaimer:

The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.

Nothing contained herein is intended to constitute financial, investment, legal, tax, or any other professional advice or opinion. Please obtain professional advice before making investment or any other decisions. Any investment decisions that may be made by the you shall be at your own sole discretion, independent analysis and evaluation of the risks involved. The use of any information set out in this document is entirely at the user's own risk.  Ujjivan Small Finance Bank Limited makes no representation or warranty, express or implied, as to the accuracy and completeness for any information herein. The Bank disclaims any and all liability for any loss or damage (direct, indirect, consequential, or otherwise) incurred by you due to use of or due to investment, product application decisions made by you on the basis of the contents herein. While the information is prepared in good faith from sources deemed reliable (including public sources), the Bank disclaims any liability with respect to accuracy of information or any error or omission or any loss or damage incurred by anyone in reliance on the contents herein, in any manner whatsoever.

To know more about Ujjivan Small Finance Bank Products Visit:"https://www.ujjivansfb.bank.in"

All intellectual property rights, including copyrights, trademarks, and other proprietary rights, pertaining to the content and materials displayed herein, belong to Ujjivan Small Finance Bank Limited or its licensors. Unauthorised use or misuse of any intellectual property, or other content displayed herein is strictly prohibited and the same is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person's nationality, residence or otherwise) be contrary to law or registration or would subject Ujjivan Small Finance Bank Limited or its affiliates to any licensing or registration requirements.

Apply for Home Loan