If you are out in the market to search for a Home Loan to buy your dream abode, it is common to compare the deals, basis the required down payment. For, down payment is nothing but the preset percentage of the cost of the residential property that you need to pay upfront to complete the purchase transaction. The remaining payment can then be availed as a Home Loan. Generally, the requisite Home Loan down payment varies from 10% to 25% depending on the value of the home.
As far as zero down payment Home Loans in India are concerned, the central bank i.e., the Reserve Bank of India (RBI), does not permit the same. RBI makes it mandatory for the home buyers to own stake in the property. So no Indian bank will offer 100% funding for the purchase of a residential property.
The RBI guidelines for lending institutions on Home Loan down payment are as follows:
However, if you do not have the necessary means to arrange for the down payment for your Home Loan in India, you need to lose your heart. Listed below are some of the best ways to fund the required down payment requirement. If you want to arrange 90-100% financing for your home, you can resort to one of the following measures:
To take a Personal Loan for your Home Loan down payment, you must first know the exact cost of the property you intend to purchase. You can do so by selecting the property and then approaching the concerned bank for Home Loan. If the bank considers you eligible for the loan, it will let you know the required down payment. The only limitation with this measure is that in case you are unable to get the Personal Loan, you will still need to pay the processing fee for your Home Loan. A good way to save yourself from this hassle is to opt for a pre-approved Home Loan such as that offered under the Bank of Baroda Home Loan scheme. In this case, your bank will provide you with a loan sanction letter, indicating the maximum amount of Home Loan you are eligible for. That being done, you can then begin your search for the property, and get a Personal Loan in accordance with the cost of the property, and down payment requirement.
Let’s understand this further with an example. Say, your pre-approved Home Loan limit is Rs. 45 Lakh. Now, you should try and find a property that is within this range. Besides, you can take a Personal Loan for the required down payment of 20%.
Once you procure the Home Loan, you can either continue to repay the Personal Loan EMIs along with the Home Loan EMI or opt for a Home Loan Top Up and prepay your Personal Loan. One of the best advantages of a top-up loan is the attractive rate of interest. Your Home Loan Top Up is at par with your existing Home Loan and thus would help you save on interest rate. However, there would be a capping of the timeline when you can use this facility.
Another advantage of top-up is the flexibility to prepay according to your financial situation. There is no prepayment fee attached.
This will save you from the strain of shelling out the down payment from your pocket and can prove to be especially helpful when you are not financially prepared to pay such a hefty amount.
If you are a salaried individual, discuss your situation with your employer. Many organisations offer general-purpose loans to their employees, which are not only easily available but also accrue fairly low-interest rates.
If you own Mutual Funds, Demat Shares, RBI Relief Bonds or other such bonds, NSC, etc., you can pledge the same to a lending institution, in exchange for a loan. If you are eligible, you can also take a loan against your Employee Provident Fund, and use the loan amount to make the down payment for your home. The secured loans are always more affordable than unsecured loans and are available without hassles.
Yes, you read it right! There is a loan that is designed specifically for those Home Loan applicants who do not have the necessary means to make the down payment. That being said, you must understand that this loan is only offered by a select few lending institutions such as Muthoot Finance (in exchange of gold).
Certainly, knowing all these measures would come to your rescue, and help you avail an affordable Rate of Interest on Home Loan. However, it is equally important to understand that a Home Loan in itself is a substantial financial commitment, and taking an additional loan alongside can be stressful to your financial health. Hence, you must have a solid back up plan for loan repayment. You must consider saving up for the same, either through traditional measures such as Recurring or Fixed Deposit accounts or through investment options such as SIPs and Mutual funds.
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