Home Loan Down Payment - Ways to Accumulate It

Home ownership is a blessing. Having a house gives you a sense of pride, belonging, and lifetime security too. However, home ownership requires massive funds which may be difficult to accumulate for most people.

You can buy a house either by getting your long-term investments liquidated or by opting for a home loan. However, you must know that choosing to liquidate your long-term investments can profoundly impact your financial goals for the future. Therefore, opting for a home loan can be a better way out. This will not just help you in overcoming the shortage of funds in the present but will also help you in leveraging your income for the future.

A home loan will require you to make a minimum down-payment to the loan provider. Once you pay the home loan down payment, the remaining amount will be borne by the lender. Gathering funds for your home loan down payment can be a little challenging owing to the constant rise in property prices. The inflation in property rates is likely to continue till eternity, but you can surely overcome it by following some important tips.

1. Build your savings corpus: This is one of the safest ways of gathering funds for your down payment. You can build a corpus by initially ploughing your savings in investment options that generate a higher rate of returns and later switching to keeping them as fixed deposits with the bank.
2. Borrowing against PPF/insurance policies: You can also borrow a loan against your provident fund or life insurance policies for funding your down payment and repay the rest of the loan in the future.
3. Borrowing from relatives or friends: If you are comfortable borrowing money from your friends or relatives, then you can opt for this option as well.

It is entirely up to you to decide the appropriate amount of down payment for your home loan. However, you must self-evaluate your budget for the present and the future. Also look through the pros and cons of making a large or small down payment on your current standard of living.

Pros of higher down payment

Higher the home loan down payment-

• The more affordable shall be your EMIs,
• Quicker can be the loan approval
• Lower will be the need to depend on borrowed funds.

Cons of higher down payment

Making a large down payment-

• Will harm your liquidity
• Lower your tax benefits.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.