Can You Get a Home Loan Without Down Payment?

Buying a home is one of the biggest financial milestones in life. For most Indians, this dream is realised through a home loan, which helps spread the cost of the property over several years. But what if you don’t have the savings for a down payment? Is it possible to get a home loan without paying anything upfront? No, you cannot. As per RBI mandate, banks, NBFCs and HFCs are prohibited from offering 100% financing of the property value. This is where LTV or Loan-to-Value ratio comes into the picture. 

Let’s dig into the reality, RBI guidelines, the concept of Loan-to-Value (LTV) ratio, and what options you might have.

What Is a Down Payment?

A down payment is the portion of the property’s value that you must pay from your own pocket. It is not covered by the home loan. The rest is financed by the bank or housing finance company (HFC). This upfront amount typically ranges from 10% to 25% of the total property cost.

RBI Norms and the Role of LTV Ratio

As per the Reserve Bank of India (RBI), banks are restricted from offering 100% home loan financing. This regulation exists to ensure responsible lending and reduce the risk of defaults.

What is LTV (Loan-to-Value) Ratio?

The Loan-to-Value (LTV) ratio is the percentage of the property’s market value that a lender is willing to finance via a home loan.

Example: For a ₹50 lakh home, the maximum loan you may get is ₹40 lakh (80% LTV). You'll need to arrange ₹10 lakh on your own as a down payment.

So, the idea of zero down payment home loans is not permitted under current RBI guidelines.

The above example is for illustration purposes only. For details pertaining to Ujjivan Home Loans, please contact the bank at 1800 208 2121.

Why Banks Don’t Offer 100% Financing

Banks and NBFCs want borrowers to have a stake in the purchase. If you invest your own money, you’re less likely to default. Also, property prices can fluctuate. A down payment acts as a buffer for both you and the lender in case the value of the property drops.

Are There Any Workarounds? Yes, but With Caution

While you can't escape the down payment entirely, there are some workable alternatives. However, each comes with its own risks and responsibilities.

1. Personal Loan for Down Payment

 Some borrowers take a personal loan to cover the down payment.

• Pros: Interest rate is similar to home loans; longer tenure.
• Cons: Only available to existing home loan holders; subject to eligibility.

2. Loan or OD Against Fixed Deposits or Gold Loan

You can raise the down payment by taking a secured loan against fixed deposits or applying for a gold loan.

• Pros: Interest rate is similar to home loans; longer tenure.
• Cons: Only available to existing home loan holders; subject to eligibility.

3. Top-Up Loan (If You Already Have a Home Loan)

Existing home loan customers with good repayment history can get a top-up loan to meet the gap in funding.

• Pros: Interest rate is similar to home loans; longer tenure.
• Cons: Only available to existing home loan holders; subject to eligibility.

4. Employer Loan or Advance

Some government and private employers offer employee housing loans or advances at subsidised rates.

• Pros: Better chances of approval; reduced EMI burden.
• Cons: Both applicants are equally liable; affects co-applicant’s credit.

5. Joint Loan with a Co-Applicant

Adding a working spouse or family member as a co-applicant can boost your eligibility and loan amount.

• Pros: Better chances of approval; reduced EMI burden.
• Cons: Both applicants are equally liable; affects co-applicant’s credit.

Before applying for a home loan, make sure to calculate your EMI with a Home Loan EMI Calculator so you can plan your finances better.