When it comes to buying a new home, the obvious course of action is to get a home loan sanctioned. Generally, banks and financial corporations provide about 80 to 90 percent of your expanses, the remaining amount (about 20% or so) is to be provided out of your own pockets. This amount is called down payment. Even the percentage might look small in figures but can cost a fortune, if the value of the would-be home is itself a veritable fortune. Procuring your down payment can be likened to a war in every respect, and yet like all wars, the winning side earns its victory through meticulous planning and sticking to that plan religiously. And every planning has a structure to follow, a series of objectives it needs to achieve in order to claim victory.
Luckily, we are list some tips and tricks that might prove to be beneficial for you as far down payment is concerned:
- Save: Providing for down payment can cause a heavy strain on your pockets. The best thing to do would be to finance the down payment for your acquired property from your savings account. Hence, this is a majorly important that you start a habit of saving your money well before you use your savings to fund your down payment expenses Ideally, savings should be done over the years, before you actually consider getting a new home for yourself. Only then can you successfully cover the cost of down payment for your new home. The best way to save your money is either via fixed deposits you keep in banks, or through investing in mutual fundsOf course you can take other measures through which you can procure your down payment amount, and they include taking another loan or to lend money from your friends and relatives. However, both of these procedures might just prove themselves to be more harmful than beneficial because both these techniques would involve returning the loaned amount to the lender in question, and in the case of a bank, it could also incur and interest. The best way., therefore, is to use your savings.
- Mortgaging and Liquidating Assets: You can obtain your down payment amount by either mortgaging or liquidating your assets and investments. Any thing: an old car, unused plot of property, gold, silver ornaments – anything that could hold value as property can be mortgaged or liquidated to fund your down payment needs. You can also secure a loan against your insurance policies, rent amount, fixed deposit, provident fund, etc to pay your down payment. Additionally, the Government now allows people to withdraw 90% of their Employee provident Fund (EPF), so that they can pay for either [purchasing or for constructing their homes.
While we have discussed two major options by which you can provide finances to the down payment amount. But if you’re more aware of the financial world and the practices associated with it, you would realise that there are ways that can be used resourcefully (and creatively) to obtain your funds.
3. For instance, due to the policies like Affordable Housing and initiatives like Housing for All by 2022 have made urban and rural development a key priority for the Ministry of Housing and Urban Poverty Alleviation. In fact, many Housing Finance Corporations (HFCs) and Non-Banking Financial Corporation (NBFCs) have come up and are presently offering attractive interest rates on loans and higher loan eligibility, as well. This implies that, now, borrowers would be able to obtain 90% of the price of their new home, as their loaned amount, while they only need to provide 10% of the price amount as down payment.
4. Presently, it isn’t just the banks. As we have seen, housing finance corporations and non-banking financial institutions are also lending to borrowers for purposes such as the payment for stamp-duty, renovation and extension of homes, paying the amount of property registration, payment of conveyance deed, etc. There are also deferred payment plans, where you can pay your down payment to the builders in separate instalments, just like the EMI you pay on your home loan.
It is expected that the growth of the housing sector would be certainly reflective of the dreams and needs of the Indian middle classes, and in that process, fulfil them. Since the start of the 21st century, a rate of a hundred percent insolvent in foreign direct investment (FDI) has made it possible for the sector to progress and grow at a remarkable pace. However, the sector needs to embrace the entirety of the country in order to legitimately address the problems thrown by the need to provide homes for a billion people, and the solutions are called on to be long-lasting ones rather than an assortment of ad-hoc, short-term patchwork repairs. Here, housing loans comes as a good solution to the problem, but the intelligent allocation of financial resources are required at not only paying off your home loan EMI but also paying off your down payment is required, for the loans to positively benefit you. We hope that the aforementioned steps would help as a guide for successfully planning the manner in which you would pay your down payment amount.
5. The best shot would be to try a combination of pooling together your savings, and mortgaging some of your assets (or even liquidating them), if the savings amount falls short of the total down payment amount. For paying the amount of down payment, the best way to go would be choosing the deferred payment option, by which your down payment can be sent as instalments to the builders; this will prevent unnecessary stress and strain.