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Tata Capital > Blog > Loan for Home > What is the OCR amount in a Home Loan?

Loan for Home

What is the OCR amount in a Home Loan?

What is the OCR amount in a Home Loan?

Purchasing a home is an exciting venture for many. For most, buying a new home requires financing in the form of home loans. When applying for a home loan, most lenders and financial institutions require borrowers to specify how much of the amount they will be paying themselves, also known as the borrower’s “own contribution.”

A buyer’s own contribution is a crucial part of the application and approval process of getting a home loan. In this article, we delve into the specifics of the OCR amount in home loans, why it is essential, and more.

What is the OC in Home Loans?

Before understanding what an OCR is, it is essential to first understand what the term OC means. When getting a home loan, OC refers to the buyer’s contribution. It is the amount of money that buyers must pay upfront from their pockets to contribute towards purchasing the home or property.

This is usually a certain percentage of the house or property’s total market value, and is often referred to as a “downpayment” on the home. It is typically paid to the property’s builder or seller, and makes the buyer eligible for a home loan.

What is OCR in Home Loans?

The OCR full form in home loans is “Own Contribution Receipt.” Once you have paid your contribution or down payment, the builder or seller of the house or property will issue you a receipt. This receipt is known as the OCR or Own Contribution Receipt. In some cases, it may be referred to as the Margin Money receipt or MMM.

The OCR is a crucial document on a buyer’s journey towards home ownership. The OCR is proof for home loan, meaning many lenders require it during the loan approval process. This is because it displays your commitment to purchasing the property for which you seek a home loan. A buyer’s contribution towards the amount also reduces the risk faced by the financial institution from which they seek a loan.

Once the OCR has been presented to your financial institution, the remaining amount of the house or property can then be approved via a home loan.

What Should the Minimum Own Contribution be?

As per the regulations set by the Reserve Bank of India (RBI), the minimum contribution towards your home or property varies depending on the house’s cost and the loan amount you seek. The latest regulations also put a limit on how much a financial institution can lend—as per these rules, they can only finance a maximum of 90% of the entire value of the property for properties worth up to Rs. 30 lakhs.

For loans worth between Rs. 30 lakhs and Rs. 75 lakhs, a financial institution’s maximum contribution is 80% of the property’s value. Loans above Rs. 75 lakhs may contribute up to 75% of the value of the property, and the buyer has to cover the remaining amount.

Thus, depending on the value of your property and loan amount, your minimum OCR could be as low as 10%. It is important to remember that the purpose of the OCR is to lower the loan amounts buyers require as well as increase their engagement in the property.

For example, if your property is worth Rs. 25,00,000, the maximum loan amount you can get is Rs. 2,25,000. Your minimum OC (Own Contribution) must be around Rs. 2,50,000, or 10% of the property’s value. Using a calculator for housing loans can be helpful in determining your EMIs and more.

The table below shows how the minimum OCR changes based on the property value and loan amount:

Property ValueMaximum Loan Amount (Loan-to-Value Ratio)Minimum OC (Own Contrubution)
Up to Rs. 30 Lakhs90%10%
Rs. 30 Lakhs to Rs. 75 Lakhs80%20%
More than Rs. 75 Lakhs75%25%

What Happens if the OCR Amount Cannot be Met?

In today’s market, collecting the funds required to make your own contribution amount can be challenging with constant fluctuations in real estate prices. In such a scenario, one can use a few different methods. These include:

1. Waiting to raise funds

The first way to deal with high OC amounts is to take the time to collect the required funding.

2. Using personal loans

Another common way to fund your OC is to utilise personal loans. However, this would require you to pay two different EMIs—one for the personal loan and one for the home loan. This could be a financial burden or negatively affect your credit history.

3. Construction-linked home loan

The final option is to purchase a property using a construction-linked home loan. Construction-linked plans typically have five stages. At every stage, the property buyer pays a pre-determined amount as their OCR, and the lending financial institution disburses the remaining amount.

The Bottom Line

Buying and financing a new home can come with its own challenges. However, proper financial planning and research can make this process much more streamlined and smooth, making it easier and quicker.

If you want to finance a new property purchase, consider a home loan from Tata Capital. We offer attractive interest rates, high amounts, flexible tenures, and more. Head to the Tata Capital website or download the app today to learn more!

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FAQs

What is OCR clearance in a home loan?

OCR refers to the "Own Contribution Receipt," which lenders will use to verify your contribution towards the purchase of a property. These help to approve home loans.

How to calculate OCR in home loan?

The OCR amount calculation will vary depending on the value of the property. It could range from 10% to 25% or more, based on the buyer's availability of funds.

What is the interest rate of OCR?

OCR and home loan interest rates will vary depending on the ending institution, borrower, and property value. At Tata Capital, home loan interest rates can be as low as 8.75% per annum.
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