How Can You Secure The Down Payment For Your Home Purchase?

Buying a house is one of the most important financial decisions that you will make in your life. It requires a lot of planning, research, and budgeting. One of the biggest challenges that you may face is arranging the down-payment for your house purchase.

The down-payment is the amount of money that you pay upfront to the seller or the builder of the house. It is usually a percentage of the total cost of the house, ranging from 10% to 25%, depending on the lender and the type of loan. The higher the down-payment, the lower the loan amount and the interest rate.

One of the easiest and most common ways to arrange the down-payment is to use your existing savings in fixed deposits (FDs) or recurring deposits (RDs). These are safe and liquid investments that offer guaranteed returns and tax benefits. You can break your FDs or RDs before maturity and use the money for your down-payment. However, you should be aware of the penalty charges and the tax implications of doing so. You should also keep some emergency funds aside for any unforeseen expenses.

If you have lent money to your friends, relatives, or colleagues, you can ask them to repay you as soon as possible. This can help you increase your cash flow and arrange the down-payment for your house purchase. However, you should be careful not to strain your relationships or compromise your trust by asking for the money back. You should also have a written agreement or a promissory note to avoid any disputes or misunderstandings.

Another option to arrange the down-payment is to borrow money from your family members, such as your parents, siblings, or spouse. This can be a convenient and flexible way to get the money without any interest or collateral. However, you should be clear about the terms and conditions of the loan, such as the repayment schedule, the interest rate, and the consequences of default. You should also respect the financial situation and the expectations of your family members and not take them for granted.

If you are a salaried employee, you can withdraw money from your provident fund (PF) account for your house purchase. The PF is a mandatory savings scheme that deducts a certain percentage of your salary every month and invests it in a government-backed fund. You can withdraw up to 90% of your PF balance or the cost of the house, whichever is lower, for your down-payment. However, you should be aware of the eligibility criteria, the documentation, and the tax implications of withdrawing money from your PF account. You should also consider the impact of withdrawing money from your PF account on your retirement corpus.

If you have a life insurance policy that has a surrender value, you can take a loan against it for your down-payment. The surrender value is the amount of money that you get if you terminate your policy before maturity. You can borrow up to 90% of the surrender value of your policy at a low interest rate. However, you should be aware of the risks and the costs of taking a loan against your insurance policy. You should also ensure that you repay the loan on time to avoid any reduction in your policy benefits or any lapse in your policy coverage.

Another option to arrange the down-payment is to take a personal loan from a bank or a non-banking financial company (NBFC). A personal loan is an unsecured loan that does not require any collateral or guarantor. You can use the money for any purpose, including your down-payment. However, you should be aware of the high interest rates, the processing fees, and the prepayment charges of taking a personal loan. You should also ensure that you have a good credit score and a stable income to get a personal loan at favorable terms.