What Should You Know About Advance Payments While Buying A Home?

What Should You Know About Advance Payments While Buying A Home?

Whether you’re seeking a new home or contemplating a home loan, securing financing is a significant financial choice that often motivates buyers to extend their budget for a more upscale residence, enhancing their lifestyle. Lenders typically demand collateral or some form of security from borrowers to ensure that loan payments are made punctually and in full. Conversely, borrowers have the opportunity to alleviate the loan burden by opting for early repayment of the entire loan amount.

When purchasing a property, the buyer may be responsible for various additional expenses, such as the fees associated with legally transferring ownership of the asset to their name. On occasion, builders or property sellers may request an advanced payment for a variety of reasons. Under such circumstances, what actions should the buyer take?

Foresight Of Real Estate Property Advance Payments:

  1. Booking amount/ token amount/earnest deposit:
  2. To prevent wasting time, certain developers may choose to share property purchase terms and conditions only with buyers who have expressed a genuine interest. As a result, these developers may ask for a goodwill deposit, booking amount, token money, or earnest deposit upfront to confirm the buyer’s seriousness about purchasing the property, even before discussing the actual deal.

  3. Is the token amount refundable:
  4. If a customer is not able to close the purchase deal for any reason, the seller typically loses the token money that was paid as a deposit. However, both parties need to sign a notarized agreement in which the seller may be eligible to receive a refund. It is common for customers to pay the token amount to the developer upon receiving a verbal promise.

  5. Stamp paper purchase:
  6. Stamp duty is a legal requirement that buyers must pay when purchasing a property, but it’s important to proceed with caution. Rushing to purchase stamp duty papers without careful consideration can lead to wasted resources if the property or the buyer’s interest changes. Unfortunately, these legal documents are typically non-refundable, so it is essential to make a firm decision before proceeding with the purchase of stamp paper. Although the law mandates stamp duty payment for property purchases, it’s advisable not to rush into it, as you may end up wasting your investment if you withdraw from the deal or if the seller decides to back out. This is because stamp papers are non-transferable and non-refundable.

  7. Advance TDS Payment:
  8. Starting from April 1st, 2022, if the stamp duty value of a property or the sale consideration exceeds 50 lakhs, the buyer must deduct TDS at a rate of 1%. Previously, only the sale consideration was taken into account for this requirement. This rule applies to all types of properties, such as residential, commercial, industrial, flat, building, or vacant plots, except agricultural land.

  9. Advance payment to secure your home loan:
  10. It can be risky to make advance payments on new house loans, especially when you are planning to sell a residential property. There is a possibility that the seller may request an advance payment to clear the current duo loan amount on the property, allowing the sale to proceed with proper documentation. However, it is advisable for buyers to avoid such payments.

    To ensure that the property’s loan has been fully repaid and there are no outstanding charges, the lender must issue a ‘No Objection Certificate’ (NOC). It is only possible to buy a property with an existing loan if the current owner repays the entire loan amount before selling it.

    In metro cities like Mumbai, owning a home is a common aspiration as it offers stability and growth opportunities. With the desire for an ideal lifestyle on the rise, there are various real estate developers in Mumbai to explore.

    The Runwal Group is a prime choice that has taken on the responsibility of fulfilling the dreams of aspiring homeowners by offering luxurious living spaces where they can create their own paradise. They aim to exceed market expectations and provide top-notch living experiences.

Key takeaway:

Purchasing a property is a significant financial decision that requires careful consideration and foresight. Advance payments are a crucial aspect of the process that can benefit both the buyer and the seller. However, it’s essential to be aware of the various types of advance payments and their terms and conditions to avoid any confusion or loss of investment.

The Runwal Group is an ideal option for those seeking premium residences that cater to their desired lifestyle. With their commitment to excellence, they are among the leading real estate developers in Mumbai and strive to exceed market expectations to fulfil the dreams of aspiring homeowners. The Runwal Group has earned a reputation for developing renowned gated communities and ensuring timely delivery of their projects.

Additionally, the Runwal Group is known for their commitment to quality construction, attention to detail, and creating sustainable living spaces that exceed customer expectations.

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FAQ

What are advance payments when buying a home?

Advance payments in real estate refer to a certain amount of the total price to be paid before the final deal. This is often referred to as downpayment or deposit.

How much advance payment is typically required when purchasing a home?

The typical advance payment depends on the total price of the property. It can range anywhere from 5% to 20% of the total property price.

Are advance payments refundable if the deal doesn't go through?

Advance payments serve as an insurance of the deal. In case the seller fails to comply to the agreed-upon delivery of products, the buyer can claim the refund.

Can advance payments be adjusted against the final purchase price?

Yes, advance payments can typically be adjusted against the final purchase price, depending on the terms and conditions agreed upon by the parties involved.

Are there any legal safeguards in place to protect buyers' advance payments?

Yes, there are legal safeguards in place to protect buyers’ advance payments, such as consumer protection laws and contract provisions.