The entire process of arranging one’s finances in preparation for the acquisition of a home loan involves a great number of significant procedures, the most important of which is the selection of an appropriate lender and the selection of an appropriate residence. As a result of the fact that lenders are only permitted to finance between 75 and 90 percent of the total cost, the remainder of the margin, also known as the down payment, must be amassed by the individual who is purchasing the home. The gathering of funds for a down payment can be a challenging endeavour if the process is not well planned out.
So, the following are some wise steps that you may do while you are arranging for the accumulation of a down payment for a Kotak Home Loan:
Get a quick head start on your planning
The sooner you begin saving for a down payment, the more time you give your money to grow, which in turn allows you to derive the maximum amount of value from the power of compound interest. As soon as you have determined the required down payment corpus based on the value of your house and the LTV ratio that corresponds with it, you should get started investing as soon as you are able to.
To achieve this goal during Bank of Baroda Home Loan preparation, it is necessary to select the appropriate mode of investing based on the amount of risk you are willing to take and the amount of time you have available to invest. If you need to save up for a down payment in the next three years, you should think about investing in high-yield fixed deposits or debt funds. Hybrid funds are suitable for investment horizons of three to five years, and equity mutual funds are suitable for investment horizons of more than five years.
Make every effort to make a larger initial payment
According to the criteria set forth by the RBI, lenders are permitted to finance up to 75–90 percent of the cost of the property in the form of a Kotak Home Loan. This indicates that as a borrower, you will be required to contribute at least 10–25 percent from your own personal funds. Try to make a larger down payment rather than merely saving up the minimum amount required, which is usually between 10 and 25 percent of the purchase price. This would be a wise course of action because the more money you put down as a downpayment, the less money you will need to borrow for the mortgage and then have to pay back, along with whatever interest rate is applicable to your mortgage.
In addition, a larger down payment would imply a lower LTV ratio requirement, which might increase your overall Bank of Baroda Home Loan eligibility as well as your chances of acceptance. However, while you are making efforts to amass a larger downpayment corpus, you should make sure that you do not overextend your finances or compromise on the fulfilment of other important financial goals.
Avoid taking out loans to cover the cost of the down payment
Borrowing money in the form of a loan is yet another convenient option that would-be homeowners frequently pursue when they are unable to save up enough money for a down payment. These prospective homeowners aren’t aware of the potential repercussions of taking out a loan to finance their down payment, despite the fact that doing so could appear to be an easy and speedy approach to acquiring the necessary sum of money for the down payment.
To begin with, your application for a home loan may be denied if the combined monthly instalments (EMIs) of your Kotak Home Loan and the loan that was taken for funding the downpayment push your EMI to income ratio beyond 50-60% level, thereby reducing both your ability to repay the loan and your chances of having it approved. This is because lenders generally prefer to lend to borrowers whose EMI to income proportion remains within the range of 50-60 percent. If your ratio is higher than this level, your loan application may be
Second, if you apply for a loan before taking the Bank of Baroda Home Loan, the lender will request your credit report from the credit bureau, which is what is known as a “hard inquiry.” The credit bureaus will lower your score by a few points when they receive inquiries about your credit that were initiated by lenders. Therefore, applying for a loan to obtain the amount needed for the down payment would result in a decrease in your credit score. This would result in a reduction in your chances of being approved for a Bank of Baroda Home Loan, given that the majority of lenders typically either refuse to lend to borrowers whose credit score is on the lower side or charge those borrowers a higher interest rate.
Avoid using any of the money that was set aside for investments
When applying for a Kotak Home Loan, many prospective homeowners discover that they do not have the required amount of money for a down payment, and as a result, they are forced to use funds from other assets that were originally intended for another purpose. Avoid cashing in investments that have been intended for other purposes, such as your retirement corpus, your child’s further education, or any other financial goal, in order to satisfy the requirements of your down payment. If you do so in the attempt to get a Bank of Baroda Home Loan, there is a possibility of not one but two different outcomes. In the first place, you would not be able to amass the desired amount of capital that the investments were intended to produce. Second, if you were to redeem market-linked assets while the market was in a bearish state, you would put yourself in a position where it is possible that you would incur losses.