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Plan your Home Loan down payment

11 June, 2018      Home Loans

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Buying a home is something that everyone desires most. Feeling of owning a home is very different from that of a rented home But, many people still find it quite difficult to buy their own property mostly due to lack of funds available.

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Plan your Home Loan down payment

Buying a home is something that everyone desires most. Feeling of owning a home is very different from that of a rented home and it gives you a sense of self-sustainability, pride, social status and a sense of accomplishment.  But, many people still find it quite difficult to buy their own property mostly due to lack of funds available. Although, lending options are now widely available and one can choose any bank or NBFC to avail a home loan and build or buy their dream house, but still there is one more pain area that proves to be a hindrance while planning funds to buy a property. That is, arranging for ‘Down payment’. Whenever a customer avails a home loan, whether from a bank or from NBFC, they can fund that customer no more than 80% or max. 90% but not more than that. This is a guideline that has been set up by the Reserve Bank of India and requires all home buyers to make an ‘own contribution’ of at least 10-20% of the total property value, which is paid up-front while buying the property. The reason to keep this margin money to be paid by the buyer himself is to ensure his side of commitment towards buying and keeping his property even if the loan goes bad. If the buyer has also invested in the property, he or she would be more committed to meet his loan obligations, so as to keep his property, which otherwise gets disposed to recover the loan amount, which is a situation that any lender wants to avoid. 

Ways to accumulate your Down payment

A buyer should plan his/her down payment way in advance, as this is not just some amount of money but is usually a good value that has to be accumulated through planning and using not one but multiple ways to come up with the required funds at the time of buying a property.

1.Saving:

This is the most obvious way to accumulate your down payment. One must start to save for down payment from a very early stage in life. There are various financial tools that allow a buyer to save in a very planned manner like SIPs, Fixed Deposits, Recurring Deposits. The more you save the better it is, as you will be able to give a bigger amount of Down Payment while buying your desired property, this will ultimately lead to a relatively lesser amount of financial burden in terms of the loan and thus you can enjoy smaller monthly installments.

One may choose to borrow some amount from friends or relatives, although this will not be an advisable way to accumulate funds, as again, borrowed money is nothing but more liability and financial burden.

 2. Liquidate your current assets:

This again is considered a very good option to add to your down payment fund. Most people would have some form of asset that they can choose to sell, for example, an old car or precious jewelry that has been kept safe for a long time. These options can add quite an amount to your existing savings and can increase your total sum towards down payment.

 3. Make use of current Investments:

Another way to arrange for a good amount of money is through making good use of your current investments. It can be an investment in any form, like insurance policies, Public Provident Fund (PPF), EPF etc. Funds can be borrowed against PPF, insurance policies and NSCs or accumulated funds can be liquidated from liquidating EPF.

4. Down Payment Loans:

Many banks/NBFCs also offer these loans. Although this product might not be available with all the financial institutions or even if a particular bank is offering this product, it might not offer this for all circumstances, but still, a buyer must keep this option in mind and should ask it’s lender if they provide such facility and at what conditions.

 A home buyer must use all his options available in front of him so that he /she can not only arrange for the minimum down payment requirement but can put maximum efforts to keep his financial liability to a minimum. Lesser is the liability better would be the financial health of any customer.

 
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