It takes a lot to buy a home apart from finding the right location and suitable property. You need to arrange a considerable amount of money to fund your home purchase need. And, with the property prices soaring high, not everybody has that big amount readily available the time of buying a home. So, to meet the ends, many home buyers have to depend on a Home Loan.
As buying a house with a Home Loan is a big financial decision and needs a long term commitment, you should be prepared well in advance for making at least the down payment of the loan. Usually, most of the banks fund 80% of the total value of the property, and the borrowers have to arrange the remaining 20% amount on his own. That 20% amount has to be paid in advance by the borrower and is termed as down payment. As soon as the borrower makes the entire down payment, banks start disbursing the Home Loan amount.
If you’re planning to buy a home for very long, you might be saving for the down payment, however, if it was a sudden decision or if you are unable to get the sufficient amount, then arranging for the down payment money can be a challenging task.
If you’re a first time home buyer and finding it difficult to arrange for your Home Loan down payment, these five tips can help you strategize in a better way to get the fund ready.
You need to plan a budget many months or even years (depending on your savings and income) before buying a house. Arranging for the down payment needs a disciplined financial management approach. You can leverage saving and investment schemes such as Fixed Deposits, Recurrent Deposits, Mutual Funds, etc.
Pick a mix of saving instruments based on the amount you can save each month out of your salary or other sources of income. For example, you are planning to buy a home after three years and require a down payment of 20 Lakhs, consider investing 50,000 per month in a Systems Investment Plan (SIP). With an average return of 12% p.a., you would have more than the required amount within three years to fund your Home Loan down payment.
If you could not arrange your down payment amount at the time of purchasing a home, you can take help of your close friends or family members by borrowing the required amount for a short-term period. It is advised to go for this option only when falling short by a small amount, and are sure that you will be able to repay as promised.
Loan-to-value (LTV) is the amount that a bank is ready to lend to the borrower for purchasing a property. Banks might be funding up to 80% amount of the value of a property. However, if the property value is less than 30 Lakhs, they may be ready to fund up to 90% funding too. If the borrower has a healthy Credit Score and capable enough for loan repayment, banks may sanction a good amount of loan.
When you are applying for a Home Loan, never over leverage your financial capacity, even if banks are offering 80% amount of the property value. Before finalizing the loan amount, check if you can pay the specified EMI comfortably. If you are left with sufficient fund, try to pay down payment from your own pocket or borrow from family or friends.
Registration charges and stamp duty are two common additional costs that are associated with the property purchase. Registration cost is usually around 30,000, and stamp duty is 5% of the circle rate/ actual property value/ ready reckoner rate (whichever is more in value). The rates and charges ma vary as per the city where the property is located. These costs have to be paid by the buyer, so, when you are estimating the total amount you need to raise from the bank, make sure you keep these additional costs in mind.
If you are a first time home buyer who is looking out for the best available home loan deals or want to transfer your existing home loan (through Home Loan Balance Transfer), MyMoneyMantra, the leading online finance distributor can be the one stop solution for all your home loan related worries. With an experience of over three decades, our Mortgage Specialists can help you in finding out and availing the affordable housing finance deals.
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