Downpayment is very important when buying a home or an investment property. Though partial payment of a given percentage of the property price upfront is not the only method, it is a milestone that tells you whether you can pay and get a loan, and ready for investment.
If the down payment is a concern, we can help guide you through each step of your real estate journey there (understanding and planning for your down payment). In this blog, we will tell you exactly what a downpayment is, how it affects you when you purchase property and some tips of how to manage it efficiently.
What is a Downpayment in Real Estate?
A downpayment is a payment you pay initially when buying a property. It is a percentage of the total property cost, your financial part of the purchase.
Key Points: Usually lenders require 10 – 25 per cent down of the property’s value, depending on the type of loan and lender policies. The remaining part is taken up in a home loan or mortgage. Traditional loan terms like low interest rates and smaller EMIs, tend to have higher down payment.
The Importance of Downpayment in Real Estate Transactions
1. Reduces Loan Burden: Lowering the loan amount means you’ll be repaying lower EMIs in a lower total amount of interest paid during loan tenure. Lower EMIs are also good in case you need to extend your loan tenure.
2. Improves Loan Approval Chances: Financial stability is shown by a large down payment which also increases the chance of loan approval.
3. Demonstrates Commitment: It comforts sellers and lenders, making them believe that you want to own the property.
4. Impacts Property Selection: What kind of property you can afford is likely to depend on how much you’re prepared to pay as a down payment.
The Factors Influencing Downpayment Amount
1. Property Price: For higher-value properties, the downpayment is a proportion larger.
2. Loan-to-Value (LTV) Ratio: The LTV ratio is, up to a certain percentage, of what the lender will offer for a loan. Say the LTV is 80%, then the buyer has to pay 20% down.
3. Buyer’s Financial Situation: How much you can ‘pay upfront’ depends a lot on your savings and financial capacity.
4. Type of Property: Residential, commercial or under-construction property downpayment percentage may differ.
Planning Your Downpayment: Tips from Grish World
1. Start Saving Early: The sooner you begin saving for your downpayment, the sooner you’ll acquire purchase power. Growing funds systemically means making use of fixed deposits, mutual funds or savings account.
2. Assess Your Budget: Find your overall budget, taking stamp duty, registration fees and brokerage charges into account.
3. Leverage Existing Assets: If you already have other assets, sell them or put them to work to help with your downpayment.
4. Explore Financial Assistance: Some banks and financial institutions have first-time homebuyer downpayment assistance programs or special loans available for first-time home buyers.
5. Seek Professional Guidance: At Grish World, we help our clients plan & strategy their down payments to create a smooth financial transaction.
The Downpayment Process Simplified by Grish World
We, at Grish World, know that arranging a down payment could have been hard. We are experts at guiding you through, to make this step as effortless as possible.
Here’s How We Help:
- Financial Planning Assistance: We look at your finances and work with you to create a down payment plan that is manageable.
- Property Recommendations: For your budget and what kind of downpayment, we match you with properties that fall in the same budget categories.
- Loan Guidance: We help you connect with trusted financial institutions and get you loan terms that work for your wallet.
- Transparent Processes: Being a registered RERA consultancy, we assure transparency in all financial transactions and agreements.
Final Thoughts: Make the Right Real Estate Decision with Grish World
There is no end to understanding and planning your down payment. With Grish World by your side, we provide you with expert advice, strategic planning and personalized solutions to make your dream of owning a home come to pass.