Buying a Home? Know the Role of Token Amount in Your Purchase

When you decide to buy a home, you hear many terms and processes. One important term is "token." But what does token mean in the home buying process? In this article, we will explain its meaning, how it works, and why it matters to homebuyers.

What is a token?

A token is a small amount of money that you pay to show that you are serious about buying a property. It acts as a promise that you want to buy the house. The token amount is usually a small part of the total price. It can range from a few thousand to several lakh, depending on the property's value.

Why is a token important?

• Secures the property: When you pay a token amount, it secures the property and prevents the seller from selling it to someone else. This gives you time to complete the necessary paperwork and secure financing.

• Demonstrates serious intent: Paying a token shows the seller that you really want to buy the house. It helps build trust and can help in negotiations.

• Starts the transaction process: The token is often the first step in the transaction process. It leads to more formal agreements, such as a sale agreement or a letter of intent.

How does the token process work?

• Finding a property: The home buying process starts when you find a property that you like. This can be through real estate agents, online listings, or by visiting neighbourhoods.

• Negotiating terms: Once you find a property, you negotiate the terms with the seller. This includes the price and any conditions that you may have.

• Paying the token amount: After both parties agree, you pay the token amount. This amount is usually non-refundable unless stated otherwise in the agreement.

• Formal agreement: After paying the token, a sale agreement is created. This document outlines the terms of the sale, including the total price and payment schedule.

• Arranging financing: With the token paid and the agreement in place, you can begin to arrange for financing, such as a home loan.

How much should you pay as a token amount?

The token amount varies based on several factors, including the property's value and the local market. However, a common range is 1-5% of the property's price. For example, if you are buying a home for Rs. 90 lakh, a token amount could be anywhere between Rs. 90,000 to Rs. 4.5 lakh.

What happens if you change your mind?

If you pay a token amount and later decide not to proceed with the purchase, you may lose the token amount. This is why it is essential to be sure before making this payment. Some agreements may specify conditions under which you can get your token back, but these terms vary from one deal to another.

Benefits of paying a token amount

• Lock in the price: Paying a token amount locks in the property's price, protecting you from price increases during the transaction period.

• Gains priority: By paying a token, you get priority over other potential buyers. This is crucial in competitive markets where properties can sell quickly.

• Streamlines the process: The token payment starts the buying process. Once this step is completed, both parties can focus on the formalities.

Token amount vs. down payment

While both token amounts and down payments are essential in the home buying process, they serve different purposes. A token amount is an initial gesture to secure the property, while the down payment is a larger sum paid at the time of closing the sale. The down payment is often a percentage of the total property price and is usually required to obtain a home loan.

Explore Bajaj Housing Finance Home Loan

If you are ready to purchase a home and need funding to make it happen, consider Bajaj Housing Finance Home Loan. With convenient terms and competitive rates, it can help you make your dream of homeownership a reality.

Here are a few benefits of opting for a home loan with us:

1. High loan amount: Get a home loan of up to Rs. 15 crore* to turn your dream home into reality.

2. Low interest rates: Enjoy interest rates starting from 8.25%* p.a, with EMIs as low as Rs. 741/lakh*.

3. Quick approval: Get approval within 48 Hours* of applying – sometimes even sooner.

4. Long repayment tenure: Repay your loan comfortably with a tenure of up to 32 years.

5. No foreclosure fee*: Individual borrowers with a floating rate of interest can prepay or foreclose their loan at no extra charge.

6. Easy application: Benefit from our doorstep document collection service for a hassle-free process.

7. Balance transfer facility: Transfer your existing home loan and get a top-up loan with better terms.

Are you ready to purchase your dream home? Apply for a Bajaj Housing Finance Home Loan today.