A home loan helps one materialise their dreams of owning a residential space. It is in fact one of the best alternative resorts to liquidating long-term investments. However, borrowers might face hindrances in raising the required funds for a home loan down payment. Given the fact that they have to bear additional charges like stamp duty, processing fees etc.
The down payment is a deciding factor in how affordable EMI payouts will be. A higher down payment will lead to lower repayment obligations. Hence, it is important to know some techniques of managing home loan down payments.
Ways to plan home loan down payment
Making a large down payment lowers an individual’s reliance towards borrowed funds and expedites the likelihood of quicker loan approval. Here are the following strategies that will help borrowers gather funds for a home loan down payment and manage their overall finances efficiently.
Build a corpus
One of the simplest and most effective ways borrowers can raise funds for a home loan down payment is to get into savings and build a meaningful corpus. Besides investing savings in high-return investments, home loan applicants must also estimate their budget and keep a track of monthly expenses. This will help them save money and use it towards a home loan down payment.
In this regard, borrowers can choose to clear their debts and gradually focus on monthly savings. In addition, they can set a goal to save a down payment amount and break the same into monthly contributions. It will multiply savings and help them access funds and make home loan down payments.
Opt for an unsecured loan
In case borrowers do not have sufficient funds to bear a home loan down payment, they can conveniently opt for an unsecured credit option. Most unsecured credit options have no-end use restrictions. Borrowers can easily use the sanctioned amount for varied financial requirements like making housing loan down payments.
Borrowers can also fetch attractive interest rates on the unsecured credit option if they have a decent credit score and cater to the lender’s eligibility criteria.
Raise funds from investments
Investments are effective sources of finance and earnings. A diversified and thriving investment portfolio will help borrowers in multiple ways. Pledging mutual funds or fixed deposits as collateral will help one avail a home loan at competitive interest rates. One can also choose to sell some shares to accumulate the required funds. It will be convenient to arrange funds for a down payment in that way. Investing in tangible and intangible assets will not only secure one’s future but will also help him or her overcome financial shortcomings.
Opt for the PMAY scheme
Pradhan Mantri Awas Yojna (PMAY) is a flagship mission implemented by the Indian government to extend affordable housing. Those who qualify for this scheme will get an interest rate subsidy of 6.5% on the home loan principle; though this percentage is based on the income bracket that beneficiaries will belong to.
It will help in lowering EMI liabilities and beneficiaries can easily get away with financial stress. In order to make the most of this housing scheme, borrowers must know the PMAY eligibility criteria.
Budget planning
A home loan is a serious financial commitment. Planning a budget will help borrowers arrange funds for making down payments. There are other factors which aid the down payment acquiring process. For instance, availing a home loan for a ready-to-move-in property instead of an under-construction property will help borrowers save on GST. In addition, applying for a home loan with a guarantor also helps borrowers get lower interest rates and registration charges, which also result in saving a substantial amount of funds.
Borrowers can also use a home loan calculator to evaluate how paying a greater down payment amount lowers EMI liabilities and vice versa. It will aid financial planning and help them choose the right loan tenor as well.
Borrowers can also take financial assistance from family members and gather necessary funds. In this case, borrowers do not have to bear the interest amount. Further, if they make late payments, they do not have to pay late penalty fees. In addition, salaried individuals can also take financial assistance from the organisations they work for.
Understanding the intricacies of home loan down payment will help borrowers conveniently sail through the entire repayment burden. Besides computing down payments, they must consider the home loan interest rate while applying for the credit option. It determines the overall cost of borrowing.
In case, borrowers are not charged competitive interest rates on their home loan amount, they can opt for a home loan balance transfer. It will enable them to shift their loan principal to another lender who is offering better interest rates and other loan terms.
However, before taking such financial decisions, they must be aware of the things to keep track of while doing a home loan balance transfer.
Besides strategizing home loan down payment, borrowers must also emphasise the pre-approved offers extended by financial institutions. These offers are available on various financial products like loans against property, home loans etc. The entire home loan application process gets streamlined. Willing borrowers can check their pre-approved offers by submitting their names and contact details.
Conclusion
In conclusion, making a down payment is inevitable while borrowers are availing a home loan. However, in case borrowers are facing financial hindrances while arranging a home loan down payment, they must resort to the above-mentioned strategies. It will help them to arrange the required funds and lower their overall repayment burden. Home loan is a long-term credit option; hence borrowers must thoroughly plan the financial move.
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