With so many different home loan options available today, the dream of purchasing or constructing a home for many is no longer a distant one. Interest rates have also dropped dramatically over the years, with lenders like us at PNB Housing offering competitive home loan interest rates. However, most lenders lend up to a maximum of 90% of your property’s worth. This has been mandated by the Reserve Bank of India/NHB guidelines.
Thus, the remaining 10% must be provided as a down payment. Depending on the value of the property, this down payment may change. As a result, if the value of your home is higher, the down payment will rise as well. In such a case, it might get overwhelming if you do not have enough money in the bank account. So, the question arises:
Can I Buy a House without a Down Payment?
Strictly speaking, the answer is no. However, you will find certain options that will help you arrange the finances required for the down payment more efficiently and quickly.
Must Read: How Much Minimum Down Payment is Required for Home Loan?
Loans with No Down payment
According to RBI guidelines, lenders can only disburse a certain amount as per the property’s value:
| Property Value | Max. Loan Amount |
|---|---|
| =<30 lac (Less Than 30 Lac) | Max Funding upto 90% of Property Value |
| > 30 lac -75 Lac | Max Funding upto 80% of Property Value |
| > 75 Lac | Max Funding upto 75% of Property Value |
Depending on the property’s value, you will have to arrange the down payment. Some of the most frequent methods of obtaining funds for a down payment on a home are listed below:
1. Take Money out of your Investments
If you have a dynamic investment portfolio, you can utilise your mutual funds, fixed deposits, etc., to make the down payment. However, it is advisable only to use investments that are not yielding high results or produce any tax benefits.
2. Do Proper Planning
Proper planning can be highly beneficial in making the down payment. For this, it is crucial to set aside a designated percentage of your monthly income. You can also invest the money in mutual funds, fixed deposits, gold, etc. The idea is that the financial burden caused by the down payment should not overwhelm you, and proper planning helps avoid that.
3. Liquidate a Few Assets
This method can aid in paying the down payment. Any asset you can quickly liquidate will fall into this category. This can include existing property, readily tradable bonds, non-physical assets, etc.
4. Take the Help of Friends or Family Members to Fund your Project
People think of it as the last thing they can do, but it isn’t so bad when you think about it. The best part is that you won’t have to pay any interest on the money you borrow. As a bonus, you won’t have to worry about late fees if you’re late with your payments. Thus, while getting a home loan without a down payment might not be possible, you can pay off the down payment with your loved ones’ help.
5. Taking out a Loan or Advance from your Company
Some employers have options for employees to avail funds to fulfil immediate financial needs. For this, you must connect with the HR department of your company to get in-depth details of the policies. It may be the case that you have to disclose some proof that you are planning to take a home loan.
Though there are a few options available to you when it comes to organising funds for a down payment, there are a few things to consider.
Must Read: How to Choose the Right Home Loan Lender
Considerations for Zero Down Payment Options
- Taking out a New Loan Might be Difficult: You’ve already taken out a mortgage and must make on-time payments to keep your credit score intact. Taking out a zero down payment home loan might put you in a financial bind.
- Taking Money from Family Might Have Unintended Consequences: It’s true that if you borrow money from your family, you won’t have to bear anything more. However, if you do not repay the debt, your family connections may get into trouble.
- Secured Loans Might Jeopardise your Assets: When you take out a loan against security, you put the assets at risk. Before you apply for one of these loans, think again.
Final Words
To avoid the risks mentioned above, it’s advisable to plan ahead of time before buying a home without a down payment to worry about as part of the loan. It’s usually better to have enough money in the bank account so you don’t have to turn to other loan alternatives when it comes time to pay off the rest of your loan. As a result, your burden will be reduced, and you will be able to purchase your ideal home without worrying about the down payment.
Connect with our representatives at PNB Housing to learn more.
