It was quite a happy day for Nina. A few months ago she and her husband had got a pre-approved loan for a certain amount. They had decided to finally go ahead and realise their dream of having a home of their own. After months of scouting neighbourhoods and viewing houses, they decided on one that matched most of their criteria.
All they needed to do now was approach the bank and kickstart the loan process. Or so Nina thought. When they reached the bank, they were in for a rude shock. The bank would only give up to 80% of the price of the house, and they had to arrange for the remaining 20%, which would be the down payment for the home. Now, within a few days, Nina had to scramble and cough up Rs 15-20 Lakh from her pocket. With most of their savings locked up in various investments, Nina and her husband were now in a big fix.
Feels familiar? It is a common enough situation and can completely ruin your prospects of getting that perfect home. What are some of the things you can do to prevent nasty surprises like these? Read on for some important points you can keep in mind if you are setting out on your home buying journey.
Planning and research
The excitement of getting a new house can sometimes prevent us from thoroughly researching every aspect of the process. While many of us are well versed with the steps needed to take a loan, we tend to miss out on small, but important details.
Talk to friends and family who have gone through the homebuying journey and support it with your research. Go to a bank and talk to the loan department to get your facts straight. By doing all of this well in advance, you will be completely prepared for what’s in store before as well as after your loan is approved.
Mutual funds investments
Yes, mutual funds are subject to market risk. However, they are a great way to shore up that much-needed capital for down payments. Given their attractive interest rates, mutual funds allow you to build up a significant sum in the shortest time possible and also give you the flexibility of withdrawing the money at any point in time.
Take another loan
Scary as it sounds, taking out another loan is sometimes the best way to deal with down payments. Leverage low-interest loans offered by your workplace or take a loan against financial assets like insurance policies, shares, and bonds. This gives you instant cash without having to sell anything.
Utilise your PF
Ideally, your provident fund should remain untouched until you are nearing retirement. But with life throwing multiple curves our way, it is sometimes the easiest way to get some much-needed financial relief. Employees who fulfil certain conditions can withdraw a partial amount from their provident fund for a specified list of purposes which includes repaying a housing loan, house repair and maintenance, buying a plot of land, and constructing a new house.
Part payments
Sometimes, banks allow you to make the down payment in instalments instead of a huge lump sum, especially if a house is still under construction. In this case, banks disburse the loan in proportion to the amount that is paid out every month. Since houses under construction can sometimes take years to finish paying in parts comes as a big relief.
