We all have this one dream of having our own roof. But there are a number of things that you need to plan well in advance for this. With Home Loan purchasing a house has become easy. However, under normal condition the financer funds only80% of the property value. Therefore, one of the most important things is to have the down payment amount ready as soon as the home loan is approved.
Down Payment in Home Loan: What is it?
In simple words, down payment in home loan is the upfront payment the borrower makes to the builder/ seller. According to the RBI rules, Banks/NBFCs in India can only grant 80% of the property value as a home loan. Therefore, the borrower has to arrange for the balance 20%. Hence, it is the difference between the loan amount and the purchase price of the home. In order to ensure that you can manage the balance amount without any hassles you need to plan well.
Down Payment: Tips to Help You Plan
1. Planning properly
If you have plans to buy a home, then you must start saving for the down payment from your salary at least few years in advance. You need to decide which expenses are necessary and which can be avoided and then accordingly save as much as you can.
2. Liquidating gold and other savings
Property is definitely going to give you better returns in the future. So in order to manage the minimum down payment for home loan you may liquidate your small savings. You can sell of gold or liquidate your fixed deposits or any bonds etc.
3. Borrowing against life insurance policies and savings
Some of you may not be much in favour of liquidating your savings. This thought is also correct as these savings are for your future. You can then opt for options like taking a loan against your life insurance policies. These loans do not incur much interest. You can also try to take loans against any other savings that you have.
4. Down payment: See if any family member can help
If you are falling short of a small amount then it will be a good option to check with close relatives and family members if they will be willing to give you a small loan which you can repay a little later.
5. Check for zero down payment option
One also needs to check for the option of zero down payment home loans India. There are banks and lenders in India who are willing to offer zero down payment option but for this the person needs to fulfil some conditions. The most important thing is that the person needs to have a good credit history. Also ideally the person needs to buy a smaller property and he or she needs to be ready to pay higher instalments.
To Sum up
Shelling out at least 20% as own contribution while purchasing a home will increase your chances of getting approved for a housing loan at a decent rate. However, don’t fail to keep in mind that the deposit amount requirement can vary because of borrower’s credit history.
This blog aims to make you understand the importance of down payment and how to plan it.
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