- Looking to buy a home but don’t have the savings to pay the part not financed by a home loan.
- Read this post that talks about the ways by which you can accumulate the sum to buy a home
No, you can’t get a 100% home loan from any lender, be it the bank, housing finance company (HFC). Lenders finance around 75%-90% of the property cost and the remaining 10%-25% to be borne by you. Usually, loan amounts upto INR 30 lakh, above INR 30 lakh-75 lakh and above INR 75 lakh are disbursed at upto 90%, 80% and 75% of the property cost, respectively. Apart from that, there are stamp duty and registration charges too. But if you are searching for a 100% home loan, it means you don’t have the savings yet. Assuming it to be true, you will need some more years before you could be in a position to buy a home. We can help you know the ways by which you can have the savings ready to pay the part not financed by home loans.
Follow These Ways to Accumulate the Amount Needed to Buy a Home
Before going to accumulate the sum, it is important to have an idea of the property cost. That will help you figure out ways by which you can get the sum ready and purchase a home along with the support from a home loan. Check the average price of the property existing in the market now. Prices won’t remain that way year after year, there will be some appreciation based on the location of the property. However, as real estate is going through a crisis of its own, price won’t appreciate much in a few years from now. Even then, prepare yourself by keeping a 5%-7% price appreciation annually. Now come to the ways that can help you accumulate the required sum.
It is one of the traditional tools to accumulate large sums over time. Monthly, you need to deposit a fixed amount in a recurring deposit account that grows on the back of interest that gets compounded on a monthly, quarterly or annual basis. The rate of interest has come down following the cut in lending rates of banks. Now, recurring deposits will yield you a return of around 5%-6% on average. So, you need to put more to yield you enough to buy a home.
Mutual funds are divided into equity, debt and hybrid categories. Given that equity investments come with greater risks, investing in this and expecting the money to grow profoundly in say 2-3 years will be asking too much. Equity investments should have a minimum time horizon of 5 years. If you can wait till that time to buy a home, maybe an investment in equity is warranted. Else you can look to invest in either debt funds or equity-oriented hybrid funds. You can invest a fixed sum every month via a Systematic Investment Plan (SIP). Debt funds come with less risk and can generate returns of around 7%-9%. The same type of investment can be made in equity-oriented hybrid funds that keep money in both equity and debt instruments. But whatever funds you choose, do check their performance over the years as the returns from any mutual fund type is not assured. So, choosing the funds becomes elementary and more so when it is about buying a dream home.
Employees Provident Fund
You may be surprised to know that you can take a loan against the Employees Provident Fund for purchasing a home. But it’s true! The retirement body i.e Employees’ Provident Fund Organization (EPFO) allows its subscribers to withdraw a maximum of 36 months’ basic salary and dearness allowance or provident fund corpus, whichever is lower. The best part is that you don’t need to return the money. Yes, it’s not a typical loan, rather a withdrawal from your savings.
Apart from this, you can also have some in your savings account and avoid unnecessary expenses so that you can buy your dream home easily.
Does the Home Loan Interest Rate Change Based on Property Cost?
Not directly, but affects indirectly. The cost of the property will dictate the loan amount and that will influence the rate of interest. The interest rate is lower in the INR 30 lakh loan bracket and rises by some in the loan bracket of INR 30 lakh-75 lakh. If the loan amount is more than INR 75 lakh, the interest rate will be even more. Check out the table showing the interest rate of different lenders according to the loan amount.
|Lenders||Loan Amount Upto INR 30 Lakh||Loan Amount Above INR 30 Lakh-75 Lakh||Loan Amount Above INR 75 Lakh|
|State Bank of India (SBI)||7.35%-7.65%||7.60%-7.80%||7.70%-8.00%|
|LIC Housing Finance (LIC HFL)||7.90%-8.55%||7.90%-8.55%||7.90%-8.75%|
How Important is a Credit Score to Your Home Acquisition?
It may not be important to access a home loan because it’s a secured loan and the lender can seize the property and auction it to recover the money if you fail to pay the home loan EMIs for 6-7 months on a trot. But as far as accessing the loan at lower rates is concerned, the credit score will play an important role. Now lenders are offering special rates to individuals having a CIBIL score of 750, 800 or any other as stipulated by the lender. This will be irrespective of the loan amount and profession of the borrower. Check out the table below to know the special rates on home loans.
|Lenders||Credit Score||Special Interest Rate (In Per Annum)|
|HDFC Limited||780 & Above||7.35%|
|LIC Housing Finance (LIC HFL)||800 & Above||7.50%|
|PNB Housing Finance (PNBHFL)||800 & Above||8.60%|
|Bank of Baroda||726 & Above||6.85%|
|Punjab National Bank (PNB)||750 & Above||7.00%|
|Bank of India||760 & Above||6.85%|