If the house costs Rs 5 lakh, the bank expects you to pay at least Rs 50,000 to Rs 75,000 from your own sources, while the remaining Rs 4,50,000 to Rs 4,25,000 is provided as loan subject to your income based eligibility.
If the value of the house goes down in future, your down payment ensures that the bank's interest is protected by ensuring that outstanding loan amount is less than the realisable value of the property. Once you decide on your dream property, the bank will get the cost of the property evaluated by its own personnel.
Surprisingly, this evaluation can throw up a price different (in most cases lower) from the actual price you are paying for the property. In such cases, you will need to shell out the difference between the actual price and the bank's valuation as additional down payment.
So again, it makes sense to ask the bank to value the property (on payment of a small fee), especially if it is an old resale property. The small fee will be worth the while to avoid future hassles.
Also see: How to play the stock market now
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