Buying a dream home usually makes it to the top of every individual’s priority list. However, with skyrocketing real estate prices in top cities and even small towns, buying a home becomes quite a pricy affair. Therefore, to assist middle-class buyers in fulfilling the distant dream, the NBFC and banks have introduced numerous home loan schemes at competitive rates. The only financial cushioning one needs to provide the lender in such a case is a down payment, which makes up for a sizeable portion of the value of the property.
Before buying a house, that you can call your own, on loan, it is important to keep a few points in mind:
- A down payment makes up for 20 per cent of the final value of the home
- There is no fixed tab on the down payment amount, however, the more the down payment you can manage, the lesser will be the home loan you would be able to apply for and consequently lesser will be the home loan EMI
- Seeking home loans for very old properties is difficult and only 50 per cent of the total market value of the home at the time of valuation is liable to be sanctioned
As a home loan down payment makes for a critical part of applying for a loan, here are a few points to keep in mind while arranging for the same:
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Plan for your home loan early-
Early planning is ideal for buying a home as it makes arranging for finances easier. With age, the responsibilities and liabilities of an individual increase, which makes it difficult to acquire the funds for a down payment.
Keep a tab on the expenses-
While a habit of saving is useful for your finances and wealth accumulation, it is essentially important to save if you are planning to take a home loan. Discretionary expenditure should only be made from the earnings left after deducting your essential expenses and monthly savings.
Liquidate your savings–
According to the recent changes in home loan down payment by the RBI, the margin money requirement limit has increased to 20 to 25 per cent of the value of the property in the market. To tackle this, one should liquidate their savings as much as possible to ensure that they have adequate funds for down payment.
Try for a soft loan-
If you are sure about better finances in the future, it might be a good option to borrow a soft loan from your family or employer. As these soft loans come with little or absolutely no interest, you will be able to save a considerable amount of money in the accrued interest on the home loan.
Loan against savings instruments-
Under certain conditions such as higher future return expectations, prematurity charges, etc., liquidating one’s finances may not be a wise choice. In such cases, one can take a loan against their savings. However, such a loan only earns 50 to 75 per cent of the actual value of the savings instruments.
Opt for a personal loan to finance the down payment
The last and the costliest option with no tax benefits is to seek a personal loan to make the down payment of the new home. Use a home loan EMI calculator to ascertain the funds required before applying for a personal loan.
Buying a new home is an exciting big step in an individual’s life. However, as it involves a significant financial investment, having a thorough understanding of the various nuances surrounding home loans and home loan down payment is essential to experience a hassle-free purchase and ownership.