How Much Do You Know About Home Down Payment?

Home Down Payment is a concept that has been at work for quite a long time. This is one of the major contributing factors that make or break a home buying decision. Considering the amount of money you need to part ways with many people either delay their home purchase or take up a loan on top of the home loan to fulfil the requirement. Most of us use up our salary for non-essential things and forget to save up for our future goals. Even though we maintain our savings by putting a limit on the expenses, sometimes it is still not enough to satisfy the home down payment needs.


What is a home down payment?


Home down payment is a type of payment, made in the early stages of a purchase of a property. The payment represents a percentage of the full purchase price. In some cases, the home down payment is not refundable if the deal falls through because of the home buyer. In most cases, the home buyer makes financing arrangements to cover the remaining amount owed to the real estate developer.


Home down payment is a payment made as part of a large purchase in the early stages of a property transaction. The higher the down payment, the lower the interest payments or EMI will be on the remainder of the home loan. Many home buyers make down payments of at least 20% of the total value of the home, and a bank or other financial institution covers the remainder of the costs through a home loan. Home down payments decrease the amount of interest paid over the lifetime of the home loan, lower the monthly payments, and provide lenders with a degree of security.


Rate of Interest


When a borrower makes a home down payment on a property purchase and uses a loan to pay for the remainder, the borrower instantly reduces the amount of interest to be paid over the lifetime of the home loan.


For example, if 100,000 INR is borrowed on a loan with a 7% interest rate, the interest owed will be 7,000 INR in the first year alone. However, if the down payment is 20,000 INR, only 80,000 INR needs to be borrowed. As a result, during the first year, the interest is only 4,000 INR, saving 1,000 INR in the first year.


Thus, it pays to have a sizable down payment on a home loan because it might save thousands of rupees in interest over the loan's lifetime. There are various online calculators that are useful when calculating interest, home loan eligibility, and the total cost of a loan with various down payments. There is a concept of home down payment assistance that is fairly new however as more people are looking for a new home, they are becoming more aware of it. It uses zero down payment emi where up to half of the down payment need is fulfilled and then it is later repaid using emis.


Easy Monthly Installment a.k.a EMI


Home down payments also reduce monthly payments on home loans. For example, if a buyer takes out a home loan for 50,00,000 with a 7% interest rate and a 25-year term, the monthly payments are 35,338 INR. However, with a down payment of 10,00,000 INR (here 20% of the total principal), the buyer only needs to borrow 40,00,000 INR, and the monthly payments drop to 28,271 INR. That is a savings of around 7000 INR per month or 2,100,000 INR over the 300-month life of the loan.


So this is a small tour of how home down payment can easily determine how well your home buying journey will go as well as your life after buying a property. Real estate market is an ocean of opportunities where you can either swim or drown. In case you are a first time home buyer then you might find yourself stuck with your savings draining away. However, this can be avoided with proper planning and knowledge of the market. Remember to plan thoughtfully and ensure that you are properly trained. Hiring a professional is also beneficial and it is always advisable.


There are various methods using which you can learn the ins and outs of the real estate market. You can visit various real estate websites and look for the property of your choice. You can visit property listing sites, join a community that helps first time home buyers to take baby steps towards a safe home buying process.

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