Most of us have a dream of buying a house and moving out of that rented one. Less than a decade ago, buying your own house meant a huge cash outlay which most middle class dwellers and professionals could ill afford making the dream of owning your own house an elusive one. Today, although home loans are easily available, prohibitive prices mean that one had to tread carefully while wading through all the payment options available.
In the current market there are a lot of plans that developers are offering to customers. The more prominent ones being the Construction-linked plan or CLP, Time-linked plan or TLP and Down payment plan or DP.
Construction-linked plan: In this plan, one has to pay the cost in the form of pre-determined installments to the builder in tandem with the development of the property. The advantage of this approach is that it gives you time to pay up, the developer does not end up charging too much at the outset itself and hence the buyer does not have to forego interest earned on their own money by paying up too much too early. It is also mandated by law for developers to pay a penalty to buyers in case they delay the delivery of the project.
Time-linked plan: The second plan is the TLP where one is required to make the payment of the installment within a predetermined time, irrespective of the development in the property. Some developers also tend to offer discounts in this plan. The advantage of this plan is the periodicity of payment, unlike construction linked plan where the demand for payment arises as and when the floors are laid out, this plan allows one to plan out expenditure in a better way and there are no surprises down the line unless of course the projects are unduly delayed in which case buyers would have paid up way before delivery.
Down payment plan: This is the traditional method of loan repayment; here the customer has to pay up nearly 20 pct of the total value of the loan upfront. Depending on your comfort, you could choose to pay up as much as you are willing resulting in commensurate discounts. Usually, if you are paying up a large percent of the amount upfront, you can even get a discount of up to 8 to 10 percent on the purchase value. While the handsome discounts are an obvious advantage, the risks are also there. It is advisable to go for this option when certainty of completion of project is high proven by developer track record.
In addition to the above, some developers are offering a plan called the Flexi payment plan; this plan is a combination of both the down payment plan and a construction linked plan.
Whatever choice you make keep in mind that the interest charged for all loans always ads up to a large amount hence do factor in the total payout with respect to interest and the benefit you are able to get on the tax side before finalizing what plan to go for.