Do not use your Savings to make Home Loan Down Payment





Don't dip into funds meant for other goals, instead build a corpus to finance the down payment on your house.

Buying a home is a big decision. And, as with all big decisions, you need to be well pre pared before you impalement it. For starters, before you decide on buying a home, make sure you have accumulated enough money to make the down payment. Hasty measures can put your financial security at risk.

Don't dip into retirement savings

Rummaging through one's retirement savings may seem the easiest option. But it is not the most desirable one. Once you start chipping away at your retirement fund, there's no stopping.You will start tapping it for all kinds of needs

With increasing life-spans, an adequate corpus to live out one's retirement has become all the more important. So, if you were thinking about dipping into your Employee Provident Fund (EPF) or the Public Provident Fund (PPF) to make the down payment on your house, think again. The option to withdraw from the PPF is there to allow access to funds in case of an emergency. Arranging for the down payment on a house is not really an emergency. Bear in mind, the magic of compounding works best when you stay invested for the long term. So, it's best not to touch one's long-term investments.

Don't withdraw from kids' funds

You may feel tempted to take out money from your children's educa tion fund. Do not give into the temptation, say experts. If you use part of the education corpus for any other purpose, then it's almost certain you won't attain your goal. Insufficient education corpus is likely to force you to opt for an education loan route and will strain your finances. Servicing multiple loans (home and education loan) will stretch your finances and will put you at risk of default.

Avoid personal loans

Opting for a personal loan could burden you with back-breaking debt obligations, given that personal loans can be quite expensive. Despite falling rates, personal loans can cost you 15-18% in interest. For a `1-crore house, home loan of `80 lakh at 9% for 20 years, will attract an EMI of `71,978. A personal loan at 18% for five years, to pay for the initial `20 lakh, will attract an EMI of `30,866. The two EMI payments could lead to a lot of financial stress, and push your other goals by several years.

Don't surrender insurance plans

Life insurance is meant to protect your family, when you are not around to take care of their needs. Premature surrendering of insurance policies may solve your down-payment problem, but would endanger your family's future security. A better option is to take a loan against insurance policies from banks or insurance companies. The latter is a better option. Loans by banks against insurance are expensive compared to loans by life insurance companies against such policies

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