Home Loans are typically given on 80-85% of the entire property value. The rest of the amount (15-20%) which is to be paid to buy the property is called the Margin Money or the Down Payment. The banks require the property buyer to pay this Down Payment amount from his/her own pocket. To pay such a corpus which can range in tens of lakhs of rupees, it is crucial for you to gather your down payment amount in such a manner that it doesn’t burden you financially when the time comes to disburse the same. For this to happen, it would be beneficial for you to be aware of thebelow planning methods which can help you pay your Down Payment:
Save then Spend: If you plan to buy a home, then save for your home systematically. A well-planned saving which is spread-out in phases can help you in paying the down payment amount without causing much concern. Savings of this corpus can be done through initiatives like Recurring Deposits and Mutual Fund Systematic Investment Plans. It is vital for you to pay your EMIs on-time to keep your credit score up and that can only happen if you save for the down payment and pay it in the initial stage so that later you can timely pay the home-loan EMIs. Moreover, be careful if you plan to borrow from other sources to pay the down payment amount as such borrowing can lead to you paying two sets of EMIs-one for down payment loan amount and other for home loan payment amount. Additionally, if you are taking a loan for paying the down payment, then the bank may become uninterested to lend you a loan as the bank may stringently re-evaluate your capability to repay. Hence, ideally pay for your down payment through your savings rather than borrowing from a bank. Furthermore, if borrowing is the only option, you can consider borrowing from a friend or your employer or a relative too.
Liquidate or Mortgage Assets & Investments: In order to pay your down payment, selling-off your valued items and assets is an option too. You can sell your time-worn car or a share of your existing property or liquidate your bank credits or redeem your mutual funds or sell your share or stocks or gold to pay the down payment amount. The idea is to redeem, in a phased and controlled manner, the cost of a valuable item to pay your down payment amount. Moreover, you are also now permitted to withdraw 90% of your Employee Provident Fund (EPF) amount against purchase or construction of a home – this can help you with the down payment. Further, you can also take a loan against your Public Provident Fund, Insurance Policy and Fixed Deposit etc. Additionally, mortgaging your assets like your existing property is a good option too if your income can take care of the loan repayments. Mortgaging your gold, jewellery, shares or a loan against rent are some other options too for paying your down payment.
Explore Other Financing Options: Since MCLR-linked home loans and banks reducing their home loan interest rates, taking loans from a bank for purchasing property has become increasingly easy. Moreover, non-banking institution such as Housing Finance Companies (HFCs) and Non-Banking Financial Companies (NBFCs) are also now willing to offer borrowers 90% loan against their total property cost which effectively means that the margin amount to be paid by borrowers is reduced. HFCs and NBFCs also lend for payment of property registration amount, stamp duty, construction etc. thus easing the entire down payment process.
Conclusively, it can be inferred that with the advent of affordable housing schemes by builders, PMAY and other housing initiatives, borrowing a home loan is getting easy by the day. Numerous options to help you pay the home loan down payment are available in the market now, one of which also includes a deferred payment plan where you can pay your down payment to the builder in instalments. However, it is crucial for you to take heed of the all the options available carefully and then, plan and decide on how to pay your home loan’s down payment.
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