Deciding to take a Home Loan is the first step you take towards buying your dream home. With property prices escalating in almost every city, taking a Home Loan can be a wise move. Not only do you keep your liquidity intact, but also gain tax benefits that are available on a Home Loan.
Choosing the lender can be a tough job. You can choose between banks or NBFCs. Home Loans typically run for a long tenure—say typically 20 to 30 years. So, you’ll end up paying a real good amount as interest. A Home Loan Interest Rate Comparison is what you should first do before zeroing on a Home Loan lender. Getting a Home Loan at cheap interest rates can have a big impact on your cash flows, especially in the long run.
The Home Loan Process requires you make a down payment before the bank advances a loan. As an accepted trade practice, banks advance 85% of the property value as Home Loan. The rest needs to be funded by you as downpayment for the loan. When and how you make the deposit and how the loan disbursement can be made is outlined in the Home Loan agreement. It’s best to read thoroughly the Home Loan Terms so that you’re not caught unaware at a later date in the form of penalties for defaulting or non-compliance.
Ways to Arrange for the Downpayment
You need to arrange for 15% of the property value as down payment. Only when you do this will banks approve your Home Loan. Whether you’ve taken the Home Loan alone or as a Joint Home Loan, the deposit will be the same. A joint loan just helps to increase your loan eligibility.
You can opt for a bridge loan, Personal Loan or a Loan Against Gold or Insurance Policy to fund the down payment.
Here are the alternatives
- Take a Bridge Loan
Bridge loans are short term loans which have a tenure that ranges from 12 to 24 months, primarily used to address short term financial needs. The interest charges are high, but this is one guaranteed way to help you pool funds to make the down payment for the Home Loan,
- Opt for Proportionate Release Option
If you’ve chosen to buy an under construction project being developed by a builder, you can request the bank for a proportionate release option wherein the banks agree to allow the borrower to make the down payment in instalments.
The loan payment is made to the builder only after the full down payment is made. However, this alternative is offered only by a few banks for only a particular class of builders.
- Build a Corpus
Buying a home is a lifetime goal for many. Its best to build a corpus by making investments which offer returns that can help build it. Set aside a part of it to fund other expenses after home purchase like registration, doing up interiors etc.
- Other Loans
You have the choice to take a loan against your FDs, insurance policies or a gold loan. Some of you might be encouraged to take a personal loan; but do keep in mind that interest charges on personal loans are quite high. This can add to the financial burden. You can also try to borrow from friends and family.
Adopt one of the above alternatives to fund your Home Loan deposit. It’s recommended that you buy a home whose EMI matches your repayment capacity. Once you book and buy a home, there are other expenses that follow. Therefore, ensure that you enjoy liquidity to pay for all your EMIs on time without a risk of default.
Tags: Home Loan Terms, Home Loan Deposit, Home Loan, Home Loan Interest Rate, Joint Home Loan, Bridge Loan