The decision to purchase a home is not an easy one. It requires a whole lot of planning and careful scrutiny of various factors. Of late, the demand for home loans has increased substantially due to the host of tax benefits provided to a borrower.
The primary step to this long journey begins with “Down Payment”.
More often than not, it is extremely difficult to arrange money within a short period. Down payments are a means to ensure your lender that you are capable of dealing with the finances of the borrowed amount, and essentially establish a working relationship.
The down payment usually comes up to a whopping 20% of the property in consideration and is essentially your primary investment amount in your home. Increasing it will directly reduce the magnitude of risk on the lender. More so, it underlines the buyer’s commitment and ability to complete the deal and indicates the buyer’s fidelity in making the loan payments. Also Read: Things to consider while taking a Home Loan
The concept of zero down payments is usually not advisable. A borrower must always opt for paying off some amount of down payment while commencing the deal. Zero down payment loans are usually offered for far smaller amounts and are hard to obtain.
Additionally, down payments never include miscellaneous expenditure such as property taxes, registration charges, transfer charges and stamp duty costs. Most loan providers include these costs in the total loan amount.
Below, we’ve listed down some preliminary tips that will help you to save money to make the down payment of your new home:
- Plan well in advance so that your smaller savings can accumulate to a larger one at the time of making the down payment.
- Save on a monthly basis in order to avoid hassles towards the time when you’re actually making a down payment.
- Borrow from family/relatives for the amount that you may be falling short of.
- Apply for a personal loan so that it is convenient for you to make the entire down payment when you’ve planned to make it.
- Save your tax refunds as fixed deposit in banks.
- Curb expenses on a rented house