Home loans are generally opted by those who wish to buy a new home or renovate a home to meet the changing needs. Banks and loan providers do not provide the entire loan amount. They would only provide 85-90% of the value of the property. The remaining amount has to be paid by the loan applicant as a down payment. This amount can also be a tough call for some as paying a lump sum amount can be difficult for a person with a meager income. No bank provides 100% loan amount and hence home loan applicants should first plan on saving for their down payment. Some tips that can help accumulate down payment for home loans are:
Set a budget for buying a home. This would help to limit the search within the budget. Setting a budget would also help to research on the options available in the market. Once it is identified that there are houses that fit in that budget range, check for the loan eligibility. There are many online sites which would help to calculate the eligibility based on the monthly income of the applicant. This would give an idea to plan how much down payment would be required.
Once the down payment is known, the focus should be on saving more than the required down payment. The thumb rule is that the more the down payment the lesser would be the burden of loan repayment. For example, let’s say the down payment required is Rs 50,000 however in the time that is planned if one can save up to Rs 1 lakh then the loan can be taken for fewer amounts and therefore reduce the burden of paying interest rates.
Check on all the available resources that can be contributed towards down payment. Let’s say there is gold that can be used for getting a loan or any other property that can be leased which would sum up for the loan amount, then the savings can be planned accordingly.
Have an eye on the market as the prices are likely to alter. If the focus of savings is limited to a particular period, then the chances of the prices going up or low is always a possibility. Research on the market fluctuations of interest rates or the prices of the houses so that good deals can be made. Banks and builders change t heir pricing according to the market.
As home loan is always available, loan applicants needn’t focus on dedicating their entire salary towards down payment. If there are other expenses that have to be prioritized, it can always be done as home loan can always be planned a little later.
Creating a separate bank account would also help to retain the savings. As the down payment may seem less important when there are other needs, opening a separate bank account would help to keep a track of the savings and also restrict the usage of the money saved.