Important Ways to Secure Funds for Home Loan Down Payment
By Anupama Deshpande | Oct 26, 2018

Whenever you take a home loan, you come across a term called "Down Payment". Down Payment is a fraction of the value of your home that you have to pay on your own i.e. out of your own pocket and rest of the funds are being made from the home loan that you have availed.

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In order to understand this, we can take an example. Suppose you want to buy a house worth Rs 40 lakhs. You have got a sanction of home loan of Rs 35 lakhs from the housing finance company (HFC) so rest of the amount i.e. Rs 5 lakhs will have to be brought out of your pocket.

Down payment helps both the lender as well as the borrower in following ways:

• It reduces the risk exposure of the lender as it has to extend lesser amount of home loan to the borrower, hence its risk reduces
• It lowers financial burden of the borrower as he needs to avail less amount of home loan after giving down payment from his pocket. So the borrower is required to avail less amount as a home loan and thereby will have to pay less EMI hence reducing his financial burden

Now, in order to pay the down payment, either you should have adequate funds or you have to manage the down payment. In case you don't find yourself in a position to bring the down payment on your own then there are some important ways to secure funds for home loan down payment in a better and organised manner:

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For big ticket purchases like house, you should plan in an appropriate way. Buying a home is a dream of everyone and to accomplish the same, he needs to start saving as soon as he starts getting income. It is a saying that Rome was not built in a day, hence you have to keep saving as much as you can so that it can be used when the time comes.

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For making a down payment, you can avail personal loan, loan against securities or loan against insurance policies. You can keep the term shorter and pay EMI as per your convenience for the same. It will provide you money as well as time. It is suggested to first compare the interest rates offered by various lenders and select the best offer for availing loan.

You can even think of borrowing from your family and friend for short term. This is beneficial as you need not pay any interest on such money and you can also return the money when you feel comfortable.

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You can sell your investments like mutual funds, gold, bonds, FDs, etc. You should opt for this option as this will also reduce your financial burden substantially as you don't have to pay any interest in this case.

You should start Equity oriented SIPs at your early age. SIP is a long term investment avenue which generates handsome returns. So this is also a very good option to secure funds for home loan down payment.

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