We discuss how to raise money for home down payment
The steps you need to take to raise money for home down payment
Especially how to raise home down payment money from investments
In a previous video, we discussed why you need to separately save for home down payment and how to do it
If you haven’t saved money separately for home down payment, you risk using money meant for other financial goals
When you save for a separate home down payment, you get a good idea of your home buying budget
If you have saved separately for a home down payment, it is unlikely that you will fall too short of money
18-24 months before you need the money, start preparing to have the money in ready-to-use mode
From higher risk, equity funds and equity-oriented hybrid funds, start moving the money to lower risk, short term debt funds
By ensuring that the principal and returns are low risk, you are securing the home down payment savings
If you have organised a pre-approved home loan, home buying should be quick
A small shortfall in home down payment can be managed
For supplementing down payment savings, consider liquidating investments with lowest returns
These investments earn returns lower than home loan interest rates adjusted for tax deductions
Idle savings account balances are often the best candidates
Next among the candidates could be fixed deposits and debt funds
Then, consider growth investments like equity investments
Among them, look for consistently underperforming investments or those whose best is behind
They are lagging behind benchmark and peers over 1 and 3 years
Spare investments with long term growth potential
While liquidating investments, consider penal provisions, charges and exit loads
Paying high charges for premature exit does not make sense
One way out is to take loans against investments or loan against assets
Instead of life insurance policy surrender consider a loan against life insurance policy
Similarly, loan against FD, mutual fund and gold instead of liquidating them
Ensure that this doesn’t significantly increase your loan repayment burden since you will also repay your home loan
Interest rates for loan against investments are quite manageable
Don’t tap into your Provident Fund (PF) and Public Provident Fund (PPF)
It will damage your progress for ample retirement savings
Don’t surrender your life insurance policy
It will leave your family vulnerable at a time of increased loan obligations
If plugging the down payment shortfall will stress your finances, consider opting for smaller property for upgrade later
You can postpone your purchase too