Having a home is every middle class dream in India. But, achieving it with managing finances is an essential part. However, having a loan is not considered a good financial decision in the middle family of India. But, as suggested, having a loan for your own home is not at all a bad idea. The only condition is you keep working on your skill and to increase your salary.
Getting a loan can be hard, especially since home prices are going up and making a down payment is always a problem. But don’t worry, would-be landlord! This complete guide will teach you effective ways to save for your down payment and get into your dream home.
Check our home loan eligibility calculator to know how much you can get. It is just an assumption as the loan relies on many factors such as credit score, age, other debts, location, salary, etc.
Understand Down Payment
The down payment for a home in India ranges from 10% to 20% of the property value. This means if you are looking for a property of ₹1 crore, you need to have at least ₹10-20 lakhs in your bank account for the down payment. And a larger down payment minimizes your loan burden, it also necessitates more upfront savings. Here’s how to strategically plan:
- Calculate Your Goal: Check the house prices at your preferred locations where you want to buy. Calculate the target down payment amount based on the desired property value and your loan eligibility. Utilize online property portals or consult real estate agents to get a realistic estimate of property prices in your preferred location.
- Analyze your monthly savings: You can list out your monthly expenses and debts presently owned. After this, you can find how much you can save and how much money is in bank accounts as emergency funds. I would suggest not to touch emergency funds. Then, start investing savings in mutual funds to achieve down payment.
- Keep investing: If you are investing in mutual funds, retirement funds, or any other investment plans, it is suggested to keep doing it. You can increase investments to achieve your target down payment amount and where you are getting better investment.
Focus should be
- Increase your skills: this way you can help yourself in getting a better salary and early down payment target. This also helps you in having more down payment and lower loan burden.
- Lower expenses: try to eliminate unnecessary expenses and invest more. This way you can achieve in your early age. After married life, sometimes it is not possible to keep the same investment focus every month as you can unforeseen expenses.
- Start investing at an early age: If you are young and just started your career, you should focus on savings and investment. This way you can have home at an early age and enjoy the afterlife stress free and focus on other financial goals.
- Invest in high-yield returns options: why I keep suggesting to invest in mutual funds or high-yield government schemes as savings accounts only yield 3-3.5% on savings which is not going to help you in achieving your home loan dream. At an early age, take suggestions from the certified financial experts, start investing as per your goals and target for the long-term.
Optimizing Your Financial Health
It is always suggested to keep your financial health in a better position with a CIBIL score more than 800. So, you can get better home loan options from your lenders.
- Pay off your debts: try to clear off high-interest debts that can make it hard to save for a down payment. To get more cash flow, pay off your current bills first, like credit card amounts or personal loans. Think about debt consolidation tactics to make payments easier and maybe even get lower interest rates.
- Improve credit score: Having good credit lets you get better loan terms with lower interest rates, which lowers the total amount of debt you have to pay off. To keep your credit score high, pay your bills on time, don’t use too much credit, and don’t get credit checks that aren’t necessary.
Leveraging Government Schemes
Search thoroughly and try to leverage any government scheme that can help in lowering your home loan burden. There is one such popular scheme – Pradhan Mantri Awas Yojana (PMAY). In this, a home buyer can get a subsidy on their interest payment. To get latest update and how the process will be done, you will have to ask you banker or lender as they directly help in getting subsidy for you and can also calculate the amount of subsidy you can get based on your home loan amount and other factors
Always Remember
Buying a home is a long-term investment. Don’t buy something quickly that will cost you a lot in the long run. You can make your dream of having a home come true, if you work hard at saving, manage your money wisely, and look into all of your choices.
Check the post for homebuyers and GST impact on them, avoid falling in trap of builders.
When you visit a bank for home loan, you should always ask for any government scheme or subsidy which you can avail and help in avoiding higher interest rate loans. Thoroughly search for any bank discount, processing fee, their reviews, interest rates, government schemes to have better a home loan with lower interest rate.
