Top Benefits of Paying a Higher Home Down Payment

According to the Reserve Bank of India (RBI), the minimum home down payment required for a conventional home loan is 20%. This home down payment requirement rule (20% of the property’s worth), imposed by the Reserve Bank of India, acts as a guarantee to the banks to ensure recovery of the amount granted as a home loan to an individual in case of bad debts.

Buying a house is a huge investment and accumulating funds for such a huge investment is more than a difficult task. A first time home buyer may require to liquidate other long term investments in a hurry to fund money for home buying. Liquidating long term investments does have an adverse impact on an individual’s financial planning and therefore, it should be the last resort to arrange for a huge investment. Taking a home loan is a better alternative than selling away long term investments as it will help an individual to overcome fund shortage by leveraging an individual's future incomes. Home loans ensure an optimal way of funding a home while repaying the amount as per the schedule set by the lender.

For the first time, home buyers saving up for a 20% home down payment is not easy, although in future it may have significant financial benefits. However, there are many different ways in which an individual can collect money for a higher home down payment. For accumulating home down payment, an individual can use his/her savings, he/she can also ask help from family and friends to raise up interest-free home down payment capital, apart from this an individual can also take the assistance of home down payment programs. Such a program helps a first time home buyer to accumulate the home down payment amount. An individual can select any option which is convenient to him/her thought the focus should always remain in raising the home down payment amount.

The below mention pointers describes the top benefits of paying a higher home down payment.

1. Larger home equity

When a home buyer pays a higher amount of home down payment, he/she becomes entitled to a bigger share in the property. Therefore it is advisable for an individual to pay a higher home down payment and become an owner to larger equity in the property till the time the property is completely owned by the individual itself.

2. Quicker loan approval

When a home buyer pays a higher amount of home down payment, it naturally ensures the credibility of the individual to repay the home loan back. Therefore it facilitates the trust of the bank which easily helps the individual to get quicker approval for the home loan with ease.

3. Lower dependence on borrowed funds

An individual’s dependency on borrowed funds reduces while buying a house with a higher home down payment. Since the equity of an individual is higher on the property, the dependency on borrowed funds reduces.

4. Higher comfort to the home buyers

A higher home down payment ensures higher comfort to the home buyers. A one-time higher down payment enables lower EMI. This enables easy payback of the home loan taken by the individual.

These were some of the benefits that a home buyer would surely enjoy by paying a higher home down payment rather than paying a lower home down payment and higher equal monthly instalments.