Is down payment for a home loan need to be paid before bank pays out any money?
Yes down payment or own contribution is to be paid beforehand to be eligible for a home loan. The builder will issue you money receipts also known as margin money receipts (MMR) or own contribution receipts (OCR). You will need to submit them with your bank to allow facilitationo f home loan process. But if you are opting for a construction linked home loan plan the payments are made on the basis on the construction stage of your property. So for each stage the bank will pay out its share of the loan amount while you would be required to pay your share.
Home Loans have a margin wherein the lender will provide a certain part of the cost of property and you provide the rest. Most lenders will fund only up to 90% of the property cost. This means that you need to shell out 10% to the builder from your own funds. This is known as the down-payment. Unless the lender knows that you have made the down-payment, they won’t be willing to disburse the loan. So, you might need to show the bank statement and the receipt provided by the builder for such down-payment. Only after this is verified, will the lender disburse the loan amount to the builder.