The decision to buy a home can be a stressful one. Thus, it is crucial to research the home buying process to ensure that one is not overspending or overborrowing. When people say they are saving for a home, they mean to gather funds to purchase their new home.
When buying a home, people usually choose between two options: full payment or downpayment. Home down payment is the money paid upfront when buying a home. It is a percentage of the home’s total value and calculates the correct amount to pay as EMI. You would typically need a down payment of at least 20% of the property’s purchase price.
According to the real estate price appreciation scenario, it will take 8-10 years for a middle-income earner to save for a down payment on a house. So, are you someone who has chosen your dream home, and the only thing keeping you from purchasing it is concern about how you will fund the down payment?
Understanding your concern, here are some options for raising the funds needed for your home down payment:
Traditional Ways to Plan Your Home Down Payment
Get a personal loan
A personal loan is one of the most common ways to pay a home down payment. But, it should be the last option as it is unsecured and thus costs more than other loans. In addition, personal loans can result in interest rates ranging from 11% to 20%.
They can increase the financial burden on buyers due to higher interest rates and shorter repayment terms for monthly instalments. Low-interest personal loans are only available if you have a good credit score and a steady income.
Asset and investment liquidation
You can make your home down payment by selling assets such as an old bike, a plot of land, or another piece of property that you own. You can also cash out your investments, such as fixed deposits, mutual funds, and PPFs. However, it is not the best method as it cuts into part of your savings. You have to make sure you’re financially secure for the time being if this is your only source of income for the foreseeable future.
Borrow money from family members
Check to see if your parents or spouse can help you with the home down payment, even if you take the money as debt and plan to repay it later. You will save a lot of time, energy, and paperwork and ensure a lender who will be compassionate if you cannot repay the loan within the specified timeline due to an unforeseen event.
However, if you do not repay the money as planned, you risk damaging your relationship. Therefore, consider the entire arrangement professional, and fulfill your obligations accordingly.
Borrow money out of your provident fund (PF) account
Employee Provident Fund Organization (EPFO) subscribers can withdraw a portion of their provident fund (PF) money for home purchases and other related purposes. Also, a subscriber could get a loan worth 36 times his salary for property purchases.
However, withdrawing funds from your PF account may take some time and require tons of paperwork. In addition, you’ll need to inform your employer about your purchase decision, as they need to verify your application. Also, if you leave your job, you can withdraw the entire amount in your PF account, subject to certain conditions.
The Smarter Way to Plan For Down Payment
Save early for your home down payment with Multipl
If you want the best value on your home down payment, you’ve come to the right place. We at Multipl have partnered with HomeCapital to bring you the best deal on how to save money on your home down payment.
All you have to do is start a HomeCapital home down payment goal on Multipl and start saving up. You get up to 12% IRR on your savings and an option to avail up to 50% interest-free down payment assistance from HomeCapital. In other words, if you have a goal of ₹10 lakhs for your down payment and if there is a need for assistance, you can get up to ₹5 lakhs interest-free from HomeCapital. Thus, planning early can avoid taking a personal loan or borrowing from friends and family. Looking at the table given below, just on the amount borrowed from HomeCapital, you can save up to ₹71,807, when compared to HomeCapital. Additionally, you can also earn market returns as Multipl will help you invest these savings into curated direct mutual funds through our personalized auto-investment model.
| Loan Amount (₹) | Tenure months | Interest Rate | Market returns | EMI (₹) | Total Amount (₹) | Savings (₹) | |
| Personal Loan | 10,00,000 | 12 | 13% | 0% | 89,317 | 10,71,807 | 0 |
| Multipl + HomeCapital | 5,00,000 savings + 5,00,000 borrowed from HomeCapital | 12 | 0% | 7%* | 41,667 | 5,00,000 | 71,807 |
*these values are for representation purposes only
The Bottom Line
Buying a home is expensive and time-consuming work. Due to this inaccessibility, your home buying journey can get delayed.
However, planning to invest for your home down payment can make your dream home goal come to life sooner. HomeCapital and Multipl have partnered to make this happen for you in a risk-adjusted and convenient way. Most importantly, it reduces financial burden and helps you save money with interest-free down payment assistance and market returns. Visit now : Download App
You can check your eligibility for HomeCapital Down Payment Assistance Here
We wish you a stress-free dream home purchase!
Read more :
How to Invest For Your First Home Down Payment?
How to Plan for Unexpected Expenses and Still Save on a Tight Budget
