Many dream about having a home, but would drop the plan not because they are worried about the affordability but are worried about arranging the down payment part.  As soon as the home loan request is approved by the bank, the very next step is to arrange cash for the down payment part. For this smart moves should be taken even before you decide to buy a home.  Start saving even as little as you can, towards the down payment of you home loan amount. Have some estimates and accordingly procure some funds for this purpose.

Banks will offer loan only to the extent of 80-85% of the market value of the property. The rest 15-20% has to be arranged as soon as bank starts processing the request. In order to avoid delays, it is important to arrange the cash for immediate use once loan is approved.  All banks demand for down payment as this is used as a collateral in case if the borrower defaults the payment. And in case if you fail to arrange the down payment amount when loan is approved, banks have every right to cancel the approved home loan.

It is important to familiarize with the down payment concept. Here are some of the ways to save some money towards down payment for home loan:

  1. Plan Ahead And Create Budget:

If you have plans of buying a house in the next 1-2 years, then it’s time to plan and create a budget now. Start saving right away for the down payment of home loan from monthly income. While planning and budgeting consider inflation and loan value appreciation. Segregate your expenses to avoidable, unavoidable and necessary expense. Stay close to your avoidable expenses and avoid as much as you can to the down payment savings piggy bank. Even if it might seem to a very small amount, it will make a lot of difference when you are in need of the same.

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  1. Liquidate Existing Small Savings:

Small and quickly liquidating savings such as gold, bonds and precious metals should be used to collect as much as possible towards home loan down payment.  If the location of your prospective house is expected to appreciate in the near future, then liquidating these are smart moves. However, always keep aside a bid of such savings to meet emergency requirements and further need of cash towards house construction or other needs.

Cash Payment v/s Home Loan for Your Dream Home

  1. Sell Property:

If you have a property that can be sold to invest towards home loan down payment, make use of the same. A vacant plot or a second hand vehicle will be of help at these situations. Holding assets that do not generate much return can be used towards down payment of home loan. An investment towards house should always be given more priority than other types of assets that generate less revenue or returns.

Know Your Capital Gains When You Sell a Property!

  1. Borrow Against Your Life Insurance Policy:

Loans against Life insurance policies have very low interest rates and there are many options available to repay the loan. If the value of your life insurance is high, higher loan amount can be expected.  This loan can be repaid during the term of the insurance policy, thus you have some time to breathe through tough financial situations.

  1. Borrow Against Savings:

Liquidating savings will not always be a wise decision; this is when the option of loan against savings should be considered. Sometimes liquidating savings will attracts pre-maturity charges and also will impact on your future expected returns, thus taking a loan on these is a great way to arrange funds. The only thing to be aware of such loans is the amount will be only up to 50-70% of the savings value. But this will be with a very low interest rate that is affordable.

Apart from these the other option is soft loan from employers. This can be considered as an option to add to your savings list while making the down payment. The rate of interest on such loans is very less or almost zero. But this might lead to a drop in your monthly income as there will be monthly deduction to repay the loan amount.

It is the responsibility of the borrower to do the due diligence check on the property document and also to arrange the down payment cash. Banks cannot be held liable in case if the property has some legal issues. Make use of these tips to arrange the down payment amount right at the time of requirement.