5 Easy Ways To Get Your Down Payment Funds Ready
Buying a home is a dream for many. With a host of home loan schemes available in the market, it has become relatively easier to arrange funds to buy a house. Over the years, home loan interest rates have gone down considerably with some banks offering rates as low as 8.25% p.a.
However, most lenders offer 90% of the property value, which means that the remaining 10% has to paid in the form of down payment. This amount may vary depending on the property value. So, if your property value is on the higher side, the down payment will also increase accordingly. This may get a bit overwhelming in case you don't have sufficient funds in your bank account.
So, is there any way to bypass down payment? No, but you can always reduce the severity of it in case you don't have enough funds.
1. Take an unsecured loan: If you don't have sufficient funds to pay the remaining amount, you can always approach a bank or lender for unsecured loans. For instance, if the value of your property is Rs.30 lakh and you have already managed to get a home loan of Rs.27 lakh, the remaining Rs.3 lakh can be paid by taking another loan. You may also get attractive rates on your personal loan if you have a good credit history.
2. Sign up for the Pradhan Mantri Awas Yojana scheme: This Government-backed scheme aims to provide affordable housing to the urban poor. As per the scheme, if you are a beneficiary, you can get up to 6.5% interest rate subsidy on your home loan. However, the subsidy percentage will be determined based on the income bracket you fall under.
Availing the scheme may help mitigate the financial pressure at the time of making repayments. It will also allow you to arrange funds for making down payment. Check the eligibility and sign up for the loan to enjoy subsidised interest rates on your home loan.
3. Pull up funds from your investments: Having a good investment portfolio can help you in multiple ways. Putting your money will not only help secure your future but can also sail you through during times of financial shortcomings. For instance, you can always place your fixed deposits or mutual funds as collateral to secure a low-interest rate loan. That way, you will be able to arrange finances to make the down payment. Also, the pressure of repaying the loan won't be that much as secured loans come with lower interest rates compared to unsecured loans.
4. Ask your friends or relatives for financing: You may consider this as your last resort, however, if you think of it, it's not that bad as an option. The best part is that you don't have to pay anything as interest on the amount you borrow. Also, even if you are late in making payments, you don't have to worry about any late penalty fees.
5. Taking a loan from your organisation:There are quite a few companies that offer loans to their employees. Of course, this may depend on various factors, including relationship with the employer and tenure served, to name a few. However, such loans require minimal documentation and can be availed easily.
Though, these are a few alternatives you can resort to while arranging finances for down payment, you still need to be wary of certain factors.
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Things to consider
1. Taking another loan can be a burden: You have already taken a home loan and must make timely repayments so that your credit score remains intact. Taking another loan can get a bit financially stressful for you.
2. Taking money from relatives can backfire: It's true that you don't have to pay anything extra if you are borrowing money from your relatives. However, family relationships can get strained if you fail to repay the amount.
3. Secured loans can put your investments at risk: You are directly putting your assets at risk if you are opting for a loan against security. Think twice before applying for such loans.
To steer clear of all such risks, it's best to start planning properly way before you take a home loan. It's always best to have sufficient funds in your bank account so that you don't have to resort to other loan options at the time of paying the remaining portion of your loan. That way, the pressure on you will be less and you can buy your dream home without dealing with the financial blues.
FAQs on How to Get Home Loan with Zero Down Payment
- What is down payment in a home loan?
The amount paid to the builder or property seller up front is known as a down payment on a home loan. The amount of the loan that covers the price of the property will determine the down payment amount. The term for this is the loan-to-value (LTV) ratio. The maximum LTV ratio limit for loans over Rs.30 lakh to Rs.75 lakh is 80% according to the RBI guidelines. If the loan amount exceeds Rs.75 lakh, the LTV ratio can increase to 75%.
- How much down payment is a good idea for a house?
There aren't any rules related to what constitutes a good or bad amount. A buyer shouldn't have to take on debt in order to make the required down payment. However, using all of the funds for the down payment is not a good idea. If you can afford it, a down payment of 30% to 40% might be a good decision.
- Is making a larger down payment more beneficial?
If you have enough savings, you may make a larger down payment than the required minimum.
- Is it possible to obtain a home loan without a down payment?
According to RBI guidelines, banks are not allowed to offer home loans in India with no down payment. You can borrow only a certain percentage of the purchase price of a property. Thus, you can cover up to 75% to 80% of your property purchase through a home loan. You will be liable to pay the remaining 20% to 25% as a down payment.
- What is the minimum down payment for a home loan?
In India, the required minimum down payment for a home loan is 20% of the total cost of the property you intend to buy.
- Is it possible to obtain a 90% home loan?
Yes, you can obtain a home loan that pays for 90% or more of the cost of the property. This is applicable to houses under Rs.30 lakh. In such a situation, a down payment for the remaining 10% would be required. The exact percentage, however, could change based on your eligibility and the lender's policies.
- How can I pay my home loan's down payment?
To pay for a home loan down payment, use savings or think about liquidating assets. If you are not sure what the ideal down payment is, ask your lender for advice. To prepare for a potential down payment on a house loan, you may open a different savings account. Create a budget and reduce unnecessary spending.
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