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Top Tips to Save Money for Your New Home’s Down Payment for Home Loan

Clix October 5, 2021

 

The decision to buy a home is not a simple one. It needs a lot of careful planning and scrutiny related to multiple factors. Over the last few years, the popularity of home loans in India has substantially increased, perhaps due to their easy availability and several tax benefits provided to the borrowers under the PMAY scheme. If you are considering buying a house with a home loan, the long journey of your commitment begins with the down payment. A down payment is the percentage of the property’s value you pay from your savings. Here you will find a few valuable tips to save money for your new home’s down payment for your home loan.

What is a Down Payment?

When you apply for a home loan, you need to pay a certain percentage of the property’s price as a down payment, and the rest of the amount is paid by the home loan lender. Usually, lenders expect you to pay 10-20% of the property’s price as a down payment. However, it is up to you if you want to make a bigger down payment. The higher the down payment you make, the lesser loan amount you will need to take and the bigger savings you will make on the interest outgo.

Down payment ensures the lender that you can deal with your finances responsibly and establish a successful relationship. A high down payment amount reduces the risk for the lender. As a result, you get faster loan approval with a lower home loan interest rate. However, remember, your down payment does not include miscellaneous expenses such as registration charges, property taxes, stamp duty costs, transfer charges, and others. So, keep some amount extra while deciding your down payment.

Tips to Save for the Down Payment

1.    Create a Goal

Before you start saving for the down payment, you must know the exact amount you actually need. This largely depends on the property’s estimated price and the percentage you want to pay as a down payment. 20% is the ideal percentage of the property’s worth you should consider paying the down payment. It may take some time to save down payment, but patience and effort will pay off in the end. Depending on your income and other financial obligations, create a goal to save a particular amount within a certain period.

2.    Streamline Your Budget

Let’s start with your income and expenses. Look at your past few months’ bank and credit card statements and find out where you are spending unnecessarily. Streamlining your budget will help identify unnecessary expenses and put a halt to them to increase your savings. The key is to keep a balance between your income and expenses to save some amount without compromising your lifestyle a lot.

3.    Find Ways to Boost Your Income

You may find some ways to augment your income, which you can save for your down payment. If time permits, try to pick a part-time gig or a second job. While thinking of finding another job, consider your qualifications, hobbies, and interests. Enjoy teaching? Take home tuitions to educate children and earn some extra money. Love pets? Be a pet-sitter at your home on weekends. Like gardening? Grow plants and sell them for cash. Look into your likes and dislikes, and you will find several ideas to earn extra income.

4.    Cut Your Expenses

While trying to save for the down payment, try to put a pause on some of the non-essential expenses, like a gym membership, dine-outs, impulse shopping, and others. Use public transport and find other ways to save small amounts, which may add up to make a considerable amount every month.

Benefits of Saving a High Down Payment

Saving a high amount for a down payment provides more benefits than you can imagine. These are a few of them:

    • Increased Chances of Loan Approval

When you pay a high percentage of the property’s price from your own pocket, lenders feel more confident in lending you a home loan.

    • Reduced Interest Rate

By saving a considerable amount of down payment, you project yourself as a low-risk borrower. As a result, lenders agree to lend you a lower home loan interest rate.

    • Manageable EMIs

The higher the down payment you pay, the lower the loan amount you will need to borrow. Lower loan amount results in smaller EMIs that you can adjust easily within your monthly budget.

    • Shorter Loan Tenure

When you take a lower home loan amount, you can choose a shorter loan tenure with manageable EMIs. As a result, you can pay off your loan faster and become the sole owner of your property.

    • Approval for a Longer Tenure

Lenders do not want to risk their money for a longer time. They want their borrowers to choose a shorter loan tenure. However, if you make a bigger down payment and take a lower loan amount, lenders may agree to approve your loan for a longer repayment tenure.

These are a few tips you can use to save money for your new home’s down payment on the home loan. Once you are ready with your down payment, apply for a home loan at Clix Capital and get a home loan of up to ₹ 2 Crore. We offer home loans in India at competitive interest rates and flexible loan tenure. However, improve your odds of getting easy approval by making a high down payment using the tips mentioned above and increase your chances of buying your dream home easily.

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