Home Loan Down Payment

Later, you can build a corpus out of your savings. Initially, you could start with investing your savings in high-return investments like equity and later transfer the gains to a safer investment option like FD. Always maintain a budget and keep your expenses on track so you can follow your plan.

• Utilise investments: Investments like FD, Mutual Funds can be used to fund the down payment on a house. If you fall short of the amount for the down payment, you can break a part of the investment. Else, you can avail of secured loans against these investments. FDs and Mutual Funds provide options for that.

• Avail of a loan: You can opt for a loan for down payment on the house. An unsecured loan would be the best option to fund a down payment in case of emergency. You can avail of personal loans up to Rs. 5 Lakhs for this purpose from any lenders if you have a good credit history.

• The ‘Proportionate Release’ option: Select lenders offer proportionate release options on home loans for new construction projects promoted by select developers. Rather than as a lump sum amount, you can pay the down payment in small amounts over time. Since the construction takes years, you can pay your down payment in instalments and the lender will release your loan disbursements accordingly.

• Take help from your organisation, family, or friends: Certain organisations offer loans for their employees in times of need. You can opt for that if you have a favourable employee-employer relationship and significant work experience in the organisation. As a last resort, you can also take help from your family or friends. Since the relations are at stake, it would be best to think through this before taking a decision.

Advantages 

• When you pay a larger down payment, the rest of the loan amount will be lower. Hence, this may fetch you a lower interest rate depending on the lender’s policies.

• A larger down payment ensures you own the property’s larger equity and that will lower your dependence on borrowed funds.

• The lenders will be comfortable with higher down payments due to decreased risk elements. So, it enhances the chances of faster loan approval.

• Since the lenders offer cost cuts in processing fees and home loan insurance premiums, if you make a huge down payment, it will help you save more money. 

Disadvantages

• The chances of financial problems during an emergency will be high since your funds will be locked up for a long term. As part of this, the liquidity will be lower.

• When you make a huge down payment, your loan amount will be lower. This will lead to a decreased home loan repayment tax benefits both on the principal and interest component. 

• If you pay a bigger amount as down payment, you may fall short of money for the initial expenses such as repairs and renovation, interior decor, etc.