What is a margin amount in home loans?

The margin amount in a home loan refers to the portion of the property's cost that the borrower must pay from their own funds. It is the difference between the total property value and the loan amount sanctioned by the lender.

Margin Amount Calculation

The margin amount is calculated using a simple formula:

Margin Amount = Property Value − Loan Amount

For example, if a property is worth ₹60 lakh and the bank offers an 80% LTV, the loan amount will be ₹48 lakh. In this case, the margin amount will be ₹60 lakh − ₹48 lakh = ₹12 lakh.

Margin Amount Across Loan Slabs

Margin requirements generally vary based on the loan amount and LTV ratio defined by lenders and regulatory guidelines.

• Up to ₹30 lakh: 10% margin (90% LTV)
• ₹30 lakh – ₹75 lakh: 20% margin (80% LTV)
• Above ₹75 lakh: 25% margin (75% LTV)

Important Aspects of Margin Amount

• Margin amount is also known as down payment or own contribution
• It must be paid before or at the time of loan disbursement
• Stamp duty and registration charges are not included in the margin amount
• Higher margin reduces loan amount and overall interest burden

The margin amount is a crucial part of home buying as it represents the borrower’s own financial contribution. A higher margin results in a lower loan amount and reduced interest cost over time. Since it cannot be financed through the home loan, borrowers should plan and arrange this amount in advance before applying for a property loan.