How do I save for a house down payment?

A few decades ago, a dream house was built brick by brick. Today, a house is built EMI-by-EMI. But what has remained unchanged through each generation is buying the right home at the right time and in the right place. Before a bank or housing finance company steps in to make this dream come true, you need to put your contribution (down payment) in place to start the process.

A down payment is an initial down payment for the purchase of expensive items/services such as a home or vehicle. It is usually paid in cash or equivalent at the time of finalizing the transaction. After that, the loan in the form of equivalent monthly installments (EMI) comes into play to finance the rest of the purchase. In a metropolitan city like Mumbai or Delhi, for an apartment or house priced at Rs 50 lakh to Rs 1 crore, the down payment amount is between Rs 10 lakh and Rs 20 lakh.

At a time when everyone is used to “buy now, pay later” systems, when you have to pay at least some of the money first, you need to plan ahead.

Save for the down payment

The first step in saving for a down payment is to calculate how much you would need. As a general rule, consider targeting a 20% down payment depending on your goals. This is the amount you need in savings. It is wise to add an extra Rs 1-2 lakh for unexpected costs. Once you have a budget and timeline, you can start investing. Your investment instrument depends on the time you have to build your corpus. If your investment window is small, say 1-2 years, go for instruments such as recurring deposits which have minimum risk. However, if you have a longer window, say around 5 years, you can consider investing in mutual funds, which offer higher returns.

“However, as markets can be volatile, it would be best to move your money from market-linked instruments to safer ones at least a year before reaching your goal so that your accumulated savings are not affected by volatility. market,” says Adhil Shetty, CEO of

Park your investments

You can invest your money in high quality mutual funds with maturities of around 3 to 6 months. You can also use a high yield savings account, where you can earn much higher interest on deposits above a certain threshold. “Apart from that, there are always FD (fixed deposits) and RD (recurring deposits). Don’t invest in stocks unless you have a long investment window of 5 years or more, says Shetty.

Save more for down payment

Calculate the corpus size you need. This will tell you what is the goal you need to work towards. “Set a budget and stick to it. Include all your planned expenses and investments and see where you can improvise and save more. Set up a separate account for each financial goal and save specifically for it. This will give you a clearer picture of the state of your finances and how you can improve them,” adds Shetty.

Saving for a sufficient down payment saves you from having to take out a hefty home loan, even if interest rates are low, as they are now, and home loans are considered good loans because you get an asset in return. However, at the same time, a smaller loan means less liability, smaller EMIs, and more money in your hands to invest in instruments that offer higher returns.

About Matthew R. Dailey

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