Top tips to raise money for down payment

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Earmarking funds for the down payment of your home can be a long-drawn process and greatly impact your liquidity as well. 99acres shares some effective tips on how to expand your existing portfolio to make sure you have enough capital for making a down payment.

Home buying is a time-consuming and challenging experience in an individual’s life. Since it is one of the biggest investments, every aspect of the process needs to be carefully planned. 

Rohan Agarwal, MD, Geopreneur Group, avers, “For most of the urban couples, this dream is fulfilled by availing home loans that are provided by leading banks and financial institutions." Though this process reduces the financial burden on the home buyer, the down payment still is a large chunk of money one needs to arrange, he adds.

For instance, if you have planned to purchase a property worth Rs 50 lakh, you need to pay at least 20 per cent or about Rs 10 lakh from your own pocket. While arranging such a huge amount of money might be a daunting task, however, with proactive and careful planning this can be  achieved.

Below are some tips to follow that can reduce some of the pressure:
 
Start a savings plan and create a budget: It is ideal to start planning or saving for the down payment. The home buyer should analyze his budget, and find the various areas where he can cut down the expenses. As a buyer, one should find how much money can be saved from monthly budget, and transfer that amount into a separate account, only meant for the home.
 
Moreover, you should decide the requirements of the house so that the amount of money saved from the salary should be managed accordingly. There should be a proper financial planning regarding instalments and savings. As an aspiring buyer, one should know how money can be saved from salary after monthly expenses and EMI’s.
 
Seek financial assistance from friends or relatives: One of the easiest options is to take a loan from friend or relatives as it come at a zero-interest cost and there will not be any pressure of returning it immediately. However, it is not advisable to borrow funds as there are high chances of disputes which might lead to strained relationships.
 
Opt for individual retirement account (IRA) funds: To arrange the down payment amount, one can consider taking a loan on the Provident Fund accretions, hand loans from relatives/friends, a soft loan from employers, selling jewelry etc., besides drawing out savings from FD, RD or equities. If the Internal Revenue Services (IRS) reckons a buyer as a "first-time home buyer," he can use a good amount of his individual retirement account funds to pay for his home. And in case, his spouse also deems to be a first-time home buyer then both can withdraw money from their IRAs. According to IRS, the first-time buyer using individual retirement account (IRA) funds for the down payment can be a buyer, spouse, a parent, a grandchild or one of his children.
 
Opt for other loans: You can also reach out to housing financial companies (HFCs) and banks for availing home improvement loans or take personal loans or take loans against your LIC policy (in case you have own one). They are usually available at an interest rate of around 10-11 per cent. However, one thing to note is that HFCs and banks will not sanction loans for an under-construction property. In addition, they can affect your credit score and reduce your loan eligibility.
 
All in all, as a buyer, you need to stay focused and keep working towards achieving your goal. Nothing will happen overnight. Saving such a big amount will take time but it is not an impossible task. Moreover, you should always remember that this saving will secure your future and brighten your chances of leading a stress-free retired life.
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