When you purchase a new home, even the slightest amount that you manage to save can have a massive impact on your overall savings when you take the plunge. You may not realize it but buying a home may come across as an easy job but when you actually get into the specifics, it is a lot harder than you may have anticipated. When you are looking at your dream 2 BHK flats in Pune, you are likely to come across various methods of payment that will eventually allow you to own your new home; however, it goes without saying that the biggest challenge that you are likely to face is the fact that you will be required to pay off a decent chunk of money as down payment. While this may seem like an uncomplicated and straightforward task as of now, you will come to realize that it is one of the most important aspects and one that can determine how much money you are likely to save in the course of buying this new home. As a rule of thumb, you must pay off at least 20% of the total cost of the home as down payment. Given below are some important reasons explaining why.
- Your chance at getting access to a mortgage increases tenfold:
The times are changing and while things have begun getting competitive, there is also a very ardent need to prove your credibility at every stage as the competition gains momentum. The kind of property that you are looking at does not really matter; it could be for residential purposes or commercial; there are several people applying for home loans every year and therefore, it is very important to prove to the financial institutions that you can, in fact, pay off the home loan in a timely fashion. Agreeing to pay a 20% amount on the property as down payment will instantly develop a sense of credibility in the mind of the concerned bank, thus easing and increasing your chance at getting a loan much quicker than you may have anticipated.
- Mortgage Payments reduce considerably:
Needless to say, when a large chunk of the money behind one of your favoured 2 BHK flats in Pune has been paid off, the remainder of the money can be paid off easily in fewer instalments and much quicker. This will take away any financial burden that you may be facing. This is due to the simple fact that you will have to take a home loan on a much lesser amount, which makes repaying that much easier.
- A substantial drop in the interest rates:
You may not realize it but a 20% down payment is the only way you can get to hear or see both, low mortgage as well as low interest rates in one sentence. Usually, when the mortgage term is increased, the interest rates shoot up and vice versa. But when you opt for a higher amount to be paid as down payment, the interest rates also drop substantially. You may not realize it but even an insignificant difference in interest rates can help you save a massive chunk of your money.
- Private Mortgage Insurance is not something you should be concerned about:
Essentially, when you pay 20% down payment for your home, you automatically get exempted from paying the private mortgage insurance, which as the name suggests, is insurance on the mortgage that you take. This can have a massive cost benefit and help you save a substantial amount of money.
Martha Evans is a real estate agent and has been working in this industry for over 7 years. She has recently worked with clients to sell 2 BHK flats in Pune. She is also constantly blogging about her endeavours.