Making a Higher Down Payment Can Help! Here is How?
Oct 26, 2017 Home Loan
It is always said the one should try to make a higher down payment while buying anything through a loan. Although saving for down payment can be little tedious and might take a little longer but the wait is worth trying. And this higher down payment plan can be a fruitful plan for any home buyer. If you want to know more details, here are some interesting reasons that tell you why you should save and go for making a higher down payment.
Less risk if selling property in a slow market: if you have made a larger down payment then you end up paying a lower EMI. In this case, if you sell your property in a slow market without earning much profit, then also your finances won’t be hurt much. At times, sellers could not sell their property due to their loan amount becomes higher than the price of the property and thus becomes a burden for the seller who is the owner as well.
Reduced home loan amount: paying a higher down payment amount results into a smaller amount of home loan which means you have to pay lower EMIs, less home loan tenure, less interest, less burden and also the home loan can get approved easily. Also, you can repay the home loan easily and faster.
Improved loan-to-value ratio: the loan-to-value ratio refers to the lending risk-assessment tool that is used to approve loans by the lenders. It is calculated by dividing the amount of loan by the total property value. Usually, lenders offer 80 percent amount of the property value as the home loan but there are some who increase this percentage as higher as 90 percent. In such cases where you make a big down payment, the risk factor for the lender decreases and you can easily get a loan for the amount you have applied for.
Less risk for the financial crisis: the concept of bigger down payment implies less risk of financial crisis. As your monthly installments get lower, the rate of interest decreases and hence the financial burden on the borrower also get reduced. Higher rates and EMI adds up to monthly expenses and if you are in a financial crisis then the situation gets worse. Therefore, larger down payment, smaller home loan EMI decrease the risk of financial crisis.
So make some adjustments in your expenses, start saving and make sure you arrange for a larger amount for making higher down payment.
Less risk if selling property in a slow market: if you have made a larger down payment then you end up paying a lower EMI. In this case, if you sell your property in a slow market without earning much profit, then also your finances won’t be hurt much. At times, sellers could not sell their property due to their loan amount becomes higher than the price of the property and thus becomes a burden for the seller who is the owner as well.
Reduced home loan amount: paying a higher down payment amount results into a smaller amount of home loan which means you have to pay lower EMIs, less home loan tenure, less interest, less burden and also the home loan can get approved easily. Also, you can repay the home loan easily and faster.
Improved loan-to-value ratio: the loan-to-value ratio refers to the lending risk-assessment tool that is used to approve loans by the lenders. It is calculated by dividing the amount of loan by the total property value. Usually, lenders offer 80 percent amount of the property value as the home loan but there are some who increase this percentage as higher as 90 percent. In such cases where you make a big down payment, the risk factor for the lender decreases and you can easily get a loan for the amount you have applied for.
Less risk for the financial crisis: the concept of bigger down payment implies less risk of financial crisis. As your monthly installments get lower, the rate of interest decreases and hence the financial burden on the borrower also get reduced. Higher rates and EMI adds up to monthly expenses and if you are in a financial crisis then the situation gets worse. Therefore, larger down payment, smaller home loan EMI decrease the risk of financial crisis.
So make some adjustments in your expenses, start saving and make sure you arrange for a larger amount for making higher down payment.
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