We all dream of possessing a perfect dwelling one day- with exceptional lifestyle features– say, a massive patio, French windows, a private swimming pool, and what not.
All of us have a different version of a dream abode, and we are elated when that dream home nears a reality. Unfortunately, for this generation, buying a dream home has become treacherous – the down payment will leave you bone dry, and getting that amount arranged is an enormous task in itself.
But what if we could give you strategies that could help you arrange for this down payment? Good news is, a Dream Home Loan could help you get that house you set your eyes on.
Home Loan
With the rising costs of real estate, it has become imperative for all of us to seek a Home Loan. A Housing Loan will take you one step closer in getting the home of your dreams. HDFC Home Loans or SBI Home Loans are two of the best bets for homebuyers as they offer the best interest rate in the market.
However, even after deciding to take a Home Loan, you would still have to make a down payment to purchase your home. This is where the entire problem arises – a down payment is a huge sum of money.
Most homebuyers tend to keep the down payment larger and Home Loan smaller so that their rate of interest is lesser. In addition, the down payment is a sign of how much you can afford, and this makes a strong point to the seller. Remember – the bigger is the down payment, the stronger is your offer to the seller. In other words, the larger is the amount of money you pay as a down payment for the total purchase offer; the more are the chances of the seller accepting it.
Golden ratio
Ideally, the down payment should be 20% of the purchase price. However, with the sky-high prices of real estate, arranging for even that 20% of the amount is a humongous task.
Here are some possible options to accumulate the money for down payments:
- Using your Provident Fund
While it is illegal to use any of your money in the PF account, EPFO has mandated that contributory employees can withdraw 90% of their PF accumulations to make down payments for their real estate investments and pay the money in the form of EMIs for their Home Loans. However, in this method, the withdrawer needs to follow a few rules. One of the most imposrtant rules is that the withdrawer has to be a member of a registered housing society that houses at least 10 members. The EPFO will then directly pay the amount to the co-operative society or the builder, promoter, state government, or the central government. Therefore, you can only buy a new property, and a property that has been put for resale cannot be purchased.
- Mutual Funds
If you are a smart investor, you may have already started a mutual funds plan. For any mutual funds plan to reap well, you will have to invest quite early. Different mutual fund schemes mature according to the prevailing market conditions and the amount you accumulate also depends on the kind of scheme you have invested in. Mutual funds are high and low risk – of course, we would advise you to go for a lower risk one. Though, the ones with high risk have more returns. Hence, you should always talk to a financial investor and find out the best way to save your money and invest smartly.
A loan down payment could include a considerable amount, and to route the required amount from the mutual funds investment, you will need to have access to enough funds.
- Take help from your family and friends
This is one of the most prevalent methods, at least in India – to arrange for down payment money. Your close family members, especially your next to kin, can loan you money. In most cases, you are also exempt from paying interest because family hardly asks you to pay back with interest. However, as a goodwill gesture, you could always pay them back with slightly more than what you had borrowed from them. Unspoken gratitude can go a long way.
This method of arranging for a down payment is also fraught with issues– you are risking a relationship going sour in case you are not able to return the money in time. The best bet for most of us is taking it from our parents – as most Indian families believe in saving parts of their funds for their children. In some cases, people even sell off a piece of land or property to gather the right amount of money.
However, the wisest decision would be to consider the Home Loan wisely.
As you may have gathered by now, a down payment amount is often a generous sum and requires a lot of smart financial planning to ensure that you can pay it. Whenever someone thinks of buying a home, arranging for the down payment is crucial, and the above methods could help them gather this corpus fund.
