A recent report suggests that in Q3 2021, a total of 55,907 housing units were sold. This demand is fuelled by low-interest rates and lucrative offers from the builders. Moreover, an online survey by NoBroker.com highlighted that 82% of individuals were looking to buy property in 2021.
However, many individuals cannot secure a home loan due to the misconceptions involved with down payments. Here, we will debunk the common myths related to a down payment on home loan.
What are the common myths regarding down payment?
Although availing a home loan is a step closer to owning the home, this type of financial assistance takes years to repay, involving a significant portion of one’s financial liabilities.
Thus, individuals need to plan their home loan EMI payments well to avoid stress. Accordingly, one should not believe in the existing misconceptions about down payments. That is why it is important to debunk the myths. Underlined below are such misconceptions:
- You have to put 20% down
It is believe that one has to make a 20% down payment while taking a home loan. However, this is no longer the rule of the thumb. In recent times, most lenders ask their borrowers to make 10% as a down payment. However, the required down payment one needs to make depend on the sanctioned loan amount. But one must remember that making a higher down payment reduces the overall monthly instalments payable.
- There are not many down payment programs available in India
This is another prevalent myth present in the real estate segment. However, this is far from the truth. Many financial institutions have assistance programs, which reduces the burden of first-time buyers.
These programs tend to finance 50% of the property’s cost, and the borrowers bear the rest 50%. However, the amount is to be pay in monthly instalments. Besides, the applicants can calculate the amount of down payment that has to be made by using the housing loan EMI calculator. It is an easy and simple tool to use.
One just needs to enter the loan amount, tenor and interest rate. This displays the total interest and EMI payable.
- It is impossible to qualify for homebuyer schemes
Potential buyers can take advantage of the prospective schemes made available by the Government. For instance, the Pradhan Mantri Awas Yojna has been launched to provide affordable housing for all. However, there are specific eligibility criteria of PMAY that has to be met by the applicant. This type of homebuyer program is made available to the public.
- A credit score does not play a part while making down payments
One should not ignore the importance of a credit score. The CIBIL score reflects the applicant’s creditworthiness. Besides, this assures the lender that the borrower can pay the outstanding amount without defaults.
However, if one’s credit score is low, he/she may end up paying a higher housing loan interest rate than expected. In such a scenario, the lenders might even ask to make a higher down payment.
On the other hand, those applicants with a CIBIL score of 750+ will secure a lower interest rate. Applicants must remember that the CIBIL score is one of the primary home loan eligibility criteria.
- It is too expensive to buy a home in today’s market
With the rising inflation and present market scenario, most people believe that buying a home is beyond their possibilities. However, that is not the case with the current government schemes and assistance programs provided by lending institutions. Besides, the RBI’s Monetary Policy Committee has kept the repo rate at 4% to make housing affordable. Hence, this is a perfect time to buy your dream home.
That is why to avail home loan tax benefits, one must do complete research about it, along with the eligibility criteria and documents that are required to qualify for the same.
Moreover, existing borrowers can avail pre-approved offers extended by leading financial institutions. These offers shorten the whole process and save time. Such offers are available on financial products, such as home loans, loans against property etc. Prospective customers can check their pre-approved offers by providing their contact details.
As outlined above, individuals must not believe these myths on a down payment on a home loan. If needed, they must do their research and talk to financial experts to get a better idea of down payments.