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Want To Know The Ideal Down payment Of Your Home Loan?

Even before one takes the first step towards buying his or her own nest, the question crops up ‘how much down payment will we need to pay and how to arrange it”. This is one question that encourages or discourages many to take the plunge towards one’s own abode.

A delay in decision making on the other hand can put you in an uncomfortable position as by the time you may arrange funds or decide on the quantum of down payment that you can actually make, the property of your choice may not be available or its price may go beyond your financial limits.

So how should you decide on the ideal down payment and ways to arrange in case you fall short.

Many may not know that financial institutions, like PNB Housing, offer as much as 90 percent of the total loan value, that means, you need to pay just 10 percent of the value of the house you intend to buy. Maximum LTVs (loan to value) are given as per the regulation stipulated by RBI and NHB based on the loan amount. Hence, check with your lender the maximum loan that can be given against the property value. Now there are different pros and cons of choosing whether to go for minimumdown payment or higher. PNB Housing explained us some of them during a recent chat:
·         Surplus funds for Contingencies: Higher corpus for down payment is advisable only if you have enough surplus funds and are absolutely sure that no contingency will arise during the loan tenure and if it does, you will have alternative channels of funds.
·      Tax Benefits: The borrowers enjoy tax benefits on their interest payment on home loan as well as on the principal component. A lower loan amount can reduce the EMI and tenure which means a lower tax benefit. If you are not looking at a tax benefit in the long run, you may opt for a higher downpayment. 
·       Home Interiors or other home essentials : Using any excess amount available towards down payment may mean that you will not have any surplus funds for interiors etc. If there is no such requirement or you have already kept funds aside for this, you may go ahead with the higher down payment plan.
·         Adequate Investments: If you are already making enough investments and have kept funds for your short term goals like child’s education etc, then you may opt for a higher down payment.
·         Risk of project delays:In a scenario where you may have invested in an under-construction property and the delivery gets delayed, you may need some surplus funds to keep the EMI going without making it an additional burden and even service rent for a long while. If you have made a large downpayment, your funds will be stuck which you could have kept aside or invested for similar emergencies and even earn interest on it. 
Anything you pay beyond that will be based on your bank balance, present and future needs and your financial goals. If you feel comfortable and have the financial security to back your decision, you can pay any amount you want as downpayment of your home loan. If not, just stick with the minimum amount asked by your home loan lender.

Now what if you do plan to buy a house but do not have the corpus for even minimum down payment available. In an ideal situation, you should plan early, much before deciding on buying a house, and start keep funds aside for down payment basis the budget. But in an unforeseen circumstance, if it is not possible, you can do the following:
             Seek support from your friends or relatives
·    Avail loan against your long-term investments like fixed deposit, provident fund, life insurance policies etc.

·         Avail soft unsecured loans if possible like personal loan. However, remember that unsecured loans will reduce the loan amount eligibility, as another loan will add up to your total debt. Also, it will increase the home loan liability and your monthly outflow towards loan repayment.

There is nothing like an ideal down payment. It all depends upon your financial condition and how much monthly expense you can bear.

Even if you have been extremely cautious and calculative about the loan and down payment ratio, you never know if situations arise where your assessment may get upset. At these times, a good and reputed financial institution can help or at least suggest an appropriate course of action.  Financial institutions like PNB Housing thrive on their customer delivery model which helps in offering tailored, flexible and friendly services based on the applicant’s needs.

It’s always good when you are assured of a satisfying home buying experience, have complete peace of mind and avail best-in-classservices and customer support.

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