Buying a house is a dream many people see. However, there is a vast gap between the wish to buy a house and purchasing it. A home loan is a tool that home buyers use to fill this gap. However, people often hesitate to buy a house because they find it challenging to raise money for down payments. Moreover, many people realise the importance of down payment when it is too late and eventually borrow more money to afford the property they are willing to buy.
Though getting a home loan has become easier than it was in the past, the bank sanction up to 85% of the total price of the property. The home buyers are required to procure a 15% balance on their own, and then the bank releases the sanctioned loan amount.
The 15% amount is the down payment for the home loan. Raising money for a home loan down payment is not an easy thing to do with all other responsibilities. However, there are several ways that you can use to save money for a down payment.
Getting a Bridge Loan
If you are planning to sell an old property to buy a new house, then you can consider getting a bridge loan. This will help you manage your immediate financial needs. Bridge loans are short term loans that you can get for 1 to 2 years. They will help you to raise money for a down payment for your new house if your previous property is getting sold within that time. You do not need to identify the seller to apply for a bridge loan. In the case where you fail to sell off your property within decided time, the lender converts your bridge loan into a housing loan.
Following the 50-30-20 plan
You need to be very disciplined about your finances while procuring money for the down payment. The 50-30-20 program will let you adopt a manner, which will eventually help you save money for a down payment. Here you have to partition your income into following three portions,
- 50%: Direct this section on your daily needs and other fixed costs.
- 30 %: Direct this section on expenses like additional shopping or festivals.
- 20%: Put this section away as savings.
This plan will allow you to save money for down payment meticulously.
Monetising your other assets
You can either borrow against a life insurance policy or liquidate a fixed deposit when you could not build sufficient money for the down payment while applying for a loan. This way, you will be able to arrange the money required for the down payment. Also, you can withdraw a certain amount from your employee provident fund (EPF).
Opt for ‘Proportionate Release’
You can consider this option, where you need to request your lender to you a proportionate release option. If the property developer is reputed, the lender may give you the option of paying down payments in %: if the property developer is well-known.
These are the ways that you can use to save money for a down payment.