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Importance of fixed obligation to income ratio (FOIR)

A borrower’s capacity to repay a loan is the first and foremost thing that is considered while applying for a loan. FOIR can help lenders easily gauge whether a homebuyer will be able to pay the EMI of the prospective loan with all the expenses they have. So, what exactly is it and what does it mean? Read on as we demystify it for you. 

What is FOIR?

The FOIR is an abbreviation for fixed obligation income ratio. Banks and financial institutions have certain crucial criteria that must be met by loan applicants before a loan can be granted to them. FOIR is one of these terms, and some consider it the most important. It is used by lenders to calculate whether an applicant has the capacity to pay debts taking into account the applicant’s income and fixed monthly obligations such as taxes, provident funds, other loans, and rent. It is also known as the debt-to-income ratio.

How is it calculated?

FOIR is one of the top ways in which banks decide whether someone is a good candidate for a loan. This means that this is one of the parameters used to decide whether someone is capable of paying a loan back.

FOIR = [Summation of Existing Fixed Obligations / Monthly Income] x 100

Let’s take an example. Consider, Sonia has a salary of ₹ 50,000 per month. Her monthly living expenses are ₹ 20,000 and she has an EMI of ₹ 5,000 per month for an education loan. Using the above formula her FOIR will be 50%. So the potential EMI amount for the proposed loan that the applicant is asking for would have to be less than 50% of their income for them to be able to pay the loan back comfortably.

How is it important to a first time home buyer?

Having a lower FOIR means that it would be easier for you, as a first time home buyer, to pay back your monthly EMI. Since your monthly obligations will be lower, the remaining savings could be dipped into for paying off the home loan. This is crucial to first time home buyers since in this case, you will be able to quickly pay off your home loan without any hiccups and without having to look for additional ways to arrange money to clear the home loan. For this reason, banks prefer to lend to individuals with a lower FOIR since it means that the applicant’s financial capacity to pay back the loan is sound.

Why is FOIR calculated before granting a loan?

It is important to consider FOIR before granting a loan. This helps banks assess who the more suitable candidate is in terms of loan repayment ability. Banks are always concerned about recovering their loans. Let us take another example. In the above example, Sonia has a FOIR of 50%. Another applicant, Aryan has a FOIR of 75%. Banks would not consider Aryan a suitable candidate for the loan repayment since his high rate of FOIR means that he has:

  • More liabilities
  • Less disposable income that can be dedicated to loan repayments

This would mean the chance of approval is lower since his capacity to repay the loan is lower. However, on the other hand, Sonia has:

  • Fewer liabilities
  • More disposable income that can be dedicated to loan repayments

Thus her capacity to repay the loan is higher and therefore her chances of getting that loan approved are also higher.

What is the rate of FOIR that banks in India consider while granting a home loan?

While the margin for Fixed Obligations to Income Ratio differs from lender to lender and varies in each scenario, banks in India usually consider 40 – 60% of income as the required FOIR of an individual for loan eligibility. It also depends on the level of income of the applicant since we cannot equate FOIR of a person with an income of ₹60,000 and that of ₹1,20,000.

What is the rate of FOIR that HomeCapital considers?

HomeCapital considers 65% of income as FOIR. This makes it easier for young, first time home buyers. They can apply for home down payment assistance without having to worry too much about their FOIR and can make their dream of owning a home come true.

How can a person improve their chances of getting a loan in case they have a high FOIR?

Some ways to boost your chances of getting a loan are:

  • Clearing existing loans – This would help your FOIR rate to decrease and your chances of home loan approval will be higher.
  • Joint loans – This can help you raise your eligibility for a loan since you will be supported in paying back the loan with a co-applicant. However, ensure that the co-applicant is a working professional and is a spouse, parent, or sibling.  

All in all, it is important for first time home buyers to calculate their FOIR and in case of a higher rate, find ways to lower it. This will make their home buying dreams come true sooner.  

How the CREDAI – MCHI is trying to help home buyers during the Covid-19 pandemic

The CREDAI – MCHI is conducting a series of webinars to assist the real estate sector in Mumbai and the Mumbai Metropolitan Region(MMR). The real estate body had conducted a webinar titled Key to Lockdown on the 6th of April 2020. It showcased the requests that they have put forth to the various departments of the government.

Speakers

The key speakers at the webinar were:

  • Mr. Nayan Shah – is the President of the CREDAI – MCHI and the Chairman and Managing Director of Mayfair Housing. He has been a member of MCHI since its inception. He has an extensive experience of 40 years in the real estate sector. Further, he is a qualified MBA professional specializing in finance and project management.
  • Mr. Deepak Goradia – is Vice Chairman & Managing Director of Dosti Realty Ltd. since 1984. He is also the Vice President of the MCHI and promotes the future of real estate. He is the brain behind the architectural grandeur and beautiful landscapes of Dosti Realty Ltd.’s projects. Mr. Garodia’s unique ideas and strategies have earned him the stature of the visionary of the group.
  • Mr. Boman Irani – is the Vice President of CREDAI National and CREDAI – MCHI. He is also the Chairman and Managing Director of Rustomjee Group. He is a first generation real estate entrepreneur and has over 23 years of experience in the industry. Mr. Irani has a degree from the Harvard Business School. Under his leadership, the group has developed more than 12.5 million square feet of residential projects and townships in the MMR.

Key highlights from the webinar for home buyers

Due to the pandemic effect of the contagion, the CREDAI – MCHI has requested for the following:

Disclaimer: Let the reader note that the following are requests, and haven’t really been accepted or implemented yet by any of the regulatory bodies.

Requests to the various offices of the government including the Prime Minister, the Chief Minister of Maharashtra, the Municipal Commissioner and the Reserve Bank of India:

  • All EMIs due and payable by home buyers to be deferred for a period of 12 months. Additionally they would not have to pay any interest on the deferred amount
  • Mr. Nayan Shah has stated that the prices of real estate would remain stable after the lockdown is lifted. He has also said not to offer any unfair commission to channel partners.
  • 5% interest subsidy for all home loans for apartments booked in the next six months irrespective of the value of the loan or tenement size
  • MahaRERA has pushed forward the completion date of all the projects for a period of 3 months such that there are no defaults in the completion of residential projects under construction
  • The CREDAI – MCHI has requested the government to reduce the stamp duty to 2% for three to four months after the lockdown is over. This will act as incentive to home buyers to buy houses.

Requests to the Urban Development Department (UDD) Minister/ Principal Secretary UDD/ Municipal Commissioner UDD:

  • All payments due as instalments after 1 January 2020 to be deferred by nine months and no interest to be charged from 1 March 2020 to 30 September 2020.
  • The Annual Schedule of Rates (ASR) of developed land for the purpose of calculating premiums under Developmental Control and Promotion Regulations (DCPR) to be linked to ASR for land with residential buildings for Mumbai to be reduced to 33% of the value of the land and buildings by the developers. ASR helps to determine the minimum value of a property at different locations based on various market factors.

You can watch the entire event here –

The HomeCapital team would like to thank the veterans of the CREDAI – MCHI for the informative webinar on Key to the Lockdown and updating home buyers on the real estate sector.

About CREDAI – MCHI

The Maharashtra Chamber of Housing Industry (MCHI) is a consortium of real estate developers in Mumbai and MMR. Formed in 1982, the MCHI is also a member of the Confederation of Real Estate Developers’ Associations of India (CREDAI). CREDAI – MCHI has a strength of over 1400+ leading developers from Mumbai and the MMR.

How long does it take for a first time home buyer to save for home down payment in India?

In India, we famously speak of roti, kapda, makan or food, clothing, and housing as the foundations of a comfortable life. Of these, housing can seem to be the most daunting to achieve. Since inflation has been skyrocketing, real estate, while always a good investment, seems like an impossible dream for many first time home buyers. Here, we want to help you understand that it is a dream that is both achievable and also a good investment if you’re smart. 

1. What is a home down payment?  

First time home buyers are often unaware that they have to make a down payment before they can opt for financial assistance to purchase a property. Simply put, the home down payment is the payment you have to raise on your own. While there are financial options for loans, the money you put in from your pocket is the down payment. This is an amount all home buyers have to put up, whether it is your first time buying property or not. So please do not feel disheartened. There are many financial options available, especially for first time home buyers.

2. The 20% home down payment myth

One prevailing myth that can be alarming to a first time home buyer is that the down payment will be 20% of the entire property amount. As we’ve said already, this is a myth. According to the Reserve Bank of India, “some lenders require 20/30 percent of the home’s purchase price as a down payment from you. However, many lenders also offer loans that require less than 20/30 percent down payment, sometimes as little as 5 percent”. This should come as a huge relief to young first time home buyers. Balking at the idea of early ownership because of the inflated percentages that are often talked about is something that can be entirely ruled out. 

3. How many years does it take to save for home down payment in India? 

Many questions go through a first time home buyer’s mind. And this one is often at the top of the list. While buying a property itself requires a larger sum that would hover somewhere near 70 lakhs or more, the down payment is a fraction of this. If you are a first time home buyer, it is important to start as soon as possible to save towards this down payment amount. If you start saving in your mid-twenties, you can reach your home down payment savings target in under a decade. In general, it is good advice for first time home buyers to start saving as early as possible and have a good credit score. Both these factors will go a long way in starting you off on the right foot on your home buying journey.

MumbaiBengaluruAhmedabadChennaiDelhi NCRPuneKolkataHyderabad
12 years5.6 years3.9 years6.9 years7 years6.2 years5.2 years3.6 years
Number of years first time home buyers need to save for down payment in India (Source: The Economic Times)

4. Presence of home down payment programs in India

There are many ways to raise home down payment in India. You could borrow from personal sources such as friends or request family members to help. You can take private loans but these have a high-interest rate. Besides, if you seek private financing, the rate of interest is high, again.

However, it is a wise option to take the benefit of HomeCapital. They have successfully fast-tracked home buying for a billion home buyers and continue to create a bigger impact. The HomeCapital program assists first time home buyers by offering half of the home down payment amount as an interest-free credit like a personal loan.

5. How are home down payment programs such as HomeCapital helpful to a first time home buyer and why is it essential?

Home down payment programs is very important. This particular program is transparent in its processes, which will come as a boon to first time home buyers. In addition, it combines technology, real estate, and housing finance. Avenues such as this are important because they are digital platforms for a techno-savvy generation who go online to find answers. The highlights of the HomeCapital program are:

  • The program assistance is in the form of an interest free unsecured loan repayable in 12 equal monthly instalments
  • It gives the much-needed boost to the savings of first time home buyers and accelerates home ownership.
  • The down payment assistance does not affect your home loan eligibility or burden you with a higher debt to income ratio.
  • There is no lien on the property.
  • The program is accepted by all major residential real estate developers.

Illustration

The following example would be helpful in explaining the benefit of the HomeCapital program:

Consider the home value is ₹60 lakhs, which has a down payment requirement of 10% (₹6 lakhs) and the remaining 10% (₹6 lakhs) is to be paid to the developer on possession. In the program, the down payment would be split evenly between the home buyer and HomeCapital. The amount paid by HomeCapital (₹2.5 lakhs) would need to be repaid in equal monthly instalments over a period of 12 months, interest free. 

ParticularsAmount
Loan To Value (LV)80% of ₹ 60 lakhs (₹ 48 lakhs)
Down Payment (DP)10% of ₹ 60 lakhs (₹ 6 lakhs)
Your Contribution₹ 3 lakhs
HomeCapital DPA₹ 3 lakhs
Tenure12 months 
EMI₹ 25000
Note: Stamp duty and taxes to be included in the initial down payment requirement as applicable. 

First time home buyers, please do not fear. There are many answers and avenues to solve all your problems. If you do your research and adopt robust savings habits, while keeping your credit score healthy, you will be well on your way to having many options by which you can find and pay for the down payment of your first home. Once you have learned about the real estate sphere, you will be able to choose the best avenue for yourself early in life.

How much do you know about home down payments in India?

Owning a beautiful home is the dream of everyone. No one wishes to pay rent throughout their life. Thus, home buyers need to plan cautiously and make decisions. Home loans are available with every bank at various interest rates. If you plan to take a home loan, a clear knowledge about a home down payment is a must. Here are some facts for you to get a clear picture of the home down payments in India.  

1. What is a home down payment? 

Home down payment is an upfront capital expenditure that you incur when you are purchasing a house. It is an out-of-pocket payment that you pay as opposed to taking a loan and making the payment. Home down payment is a critical element of procuring loans for your house. In general, down payment is a minority percentage of the full value of the asset. 

2. Why is home down payment required by banks or lending institutions? 

Lending institutions set a minimum limit for home down payments in most of the cases. It acts as a protective cloak for the lending institutions. A down payment decreases the risk of the lending institution, thereby augmenting the chances of recovering the amount when the default occurs. Higher the home down payment, the lesser the risk of the lender. In other words, home down payment gives economic cushioning to the lender that ensures the commitment of the customer to repay as a chunk of his funds are also invested in the project. Lenders also need to differentiate between a high-risk borrower and a low-risk borrower and decide the down payment amount accordingly. 

3. What is the rate of the home down payment in India? 

The Reserve Bank of India (RBI) recommends banks and NBFCs to grant up to 80% of the value of the property. That means the borrower has to account for 20% of the cost of the asset like a home down payment. In some cases, the home down payment can be lower than 20%. Some lenders grant loans for home down payments as less as 5% of the asset value. However, there is no upper limit for a home down payment i.e. you can pay as much as you want.  

4. How many years does it take to save for a home down payment in India? 

In India, people need to save substantially for a down payment. However, a rise in general income level and access to several sources of credit have made life easier when it comes to buying houses. The value of property in cities like Delhi or Mumbai is colossal in comparison to other metropolitan cities like Kolkata or Bengaluru. Thus, for a mid-level income earner, it takes around 12 years to buy a property in Mumbai, whereas it takes approximately 5 years to buy a house in Bengaluru and Kolkata.  

Mumbai BengaluruDelhi NCRPuneKolkataAhmedabadChennaiHyderabad
12 years5.6 years7 years6.2 years5.2 years3.9 years6.9 years3.6 years
Number of years first time home buyers need to save for down payment in India (Source: The Economic Times)

5. On an average, how much of their savings are people spending on the down payment?

According to a study conducted by the Economic Times, about 30% of home buyers are ready to spend half of their total savings as the home down payment. Another 30% of people are willing to shell out more than half of their life savings, while around 40% of the home buyers stood at less than 30%.

6. Is there home down payment assistant programs in India? 

A saviour for first time home buyers, HomeCapital is India’s first Home Down Payment Assistance Program. Now, you do not need to wait for an indefinite period to buy your house. The program helps you with up to 50% of the down payment in the form of an interest-free unsecured loan.

7. What are the benefits of availing a home down payment assistant program? 

HomeCapital has tie-ups with all the leading real estate developers in India as well as financial institutions. The program helps you with half of the down payment in the form of an interest-free unsecured loan. With no interest in the equation, the buyer only has to repay the principal amount in 12 equal instalments. Additionally, the program does not hinder your chances of getting a home loan and also does not entail a legal claim on the property. This enables first time home buyers to avoid the delays to accumulate money to make the down payment to their first house.

8. Should I opt for a bigger home down payment or a bigger home loan? 

A bigger down payment is beneficial in many ways such as:
• You will have more equity in the property.
• It decreases the amount you spend from your savings as HomeCapital provides you with up to 50% of the home down payment amount
• The bank offers you a home loan at a lower rate of interest
• It often ensures swift loan approval.
• You can hold on to your contingency funds and enjoy peace of mind with the HomeCapital program

9. How can I check if I qualify for a home down payment assistance program?

To qualify for the HomeCapital program, the following are essential:

  • You should be a first time home buyer between 20 – 45 years.
  • Also, you must be an Indian resident with a stable income and a good credit track record.

10. Based on my current income, I am looking to buy my first house. How can I calculate the amount that I am eligible for and my EMI?

HomeCapital has tie-ups with all the leading real estate developers in India. You can calculate your property wise eligibility based on your income and credit history using their calculators and take your first step towards home ownership.

Home is the space where we can be ourselves. It should be built with our efforts, hard work, planning and hope. Before you start to build your home, consider all your options and make a perfect one for you and your family. HomeCapital is always with you always to assist in your home buying journey.

Financial implications of buying your house early

One of the most important decisions a young professional has to make is wondering whether to invest in their own house. ‘Property finance’ is seen to be one of the important investment decisions today. While renting seems like the most cost-effective solution in the short term, in the long run, it is much better to invest in your property. Here, a new buyer would have to think about the appreciation of the property versus the cost of a similar property in the future with configurations and amenities. Let us take you through why owning a home and making this decision early on are important matters to consider.

a) Rent increase

Inflation is always a factor to consider when you are investing your money in anything. While rent might be manageable at the moment, there are factors that will more than likely cause another Global Financial Crisis in the years to come. Besides, some cities have revealed a great increase in the year on year average rental yield. Thus, due to inflation and higher rents, it makes much more financial sense to invest in your own home early. So put your money aside for property finance instead of sinking it in rent. In the former case, you will have a roof over your head but it won’t be owned by you, always a precarious situation to be in.

b) Other regular costs associated with renting

When you are renting there are many additional costs that you will incur. For one, there are always large security deposits, which means you will not be able to tap into that sum of money while you are renting. There are also other assorted costs from parking spaces, moving costs and more. All of these will be incurred with none of the security of ownership and make little financial sense.

c) Other regular costs associated with buying a home

This does not mean that there will not be other costs associated with buying a home of your own. In fact, there are quite a few costs in this case. Firstly, there are maintenance costs that will involve matters such as painting, upgrading certain areas, upkeep and more. Then there are always taxes to be paid, which will be regularly incurred. However, it is all offset by the security of having a roof over your head that is your own.

d) Closing costs

Coming into possession of your own home means you will incur a number of final payment from parties such as lenders, third parties and other middlemen. These are one time payments. These payments could have to be made in the name of stamp duty, property tax and home insurance. Thus, it would be much wiser to invest in your own home early and capitalise your savings in procuring property. Then you could pay off the closing costs earlier, as well, and subsequently have only taxes and maintenance to worry about.  

e) Other saving goals

If you have other saving goals in your life, for example, investing in a car, or creating a fund for your children’s education then it would be much wiser to invest in your own property earlier. Thus it is better to lean towards property finance earlier. In this way, you could get possession of your property sooner. Then, once you have a robust habit of making the payments associated with owning a home, you can invest in your other savings goals alongside. Or, you could come into early possession of your home and then concentrate wholly on saving to buy the car, electronics or even investing in a fund.

f) The cost of new appliances, furniture or lawn care equipment

When you are renting a home you have to definitely invest in setting up your home. This could be a cost that is incurred many times over if you move from rental to rental. Appliances are needed in every home so that is always a cost incurred if you move houses a lot. Furniture is also a must so if you move a lot then you could be paying through the nose to furnish (or, at the very least, move your own furniture) every time you go to a new place. This would not be a factor, however, if you invest in your own home early. In that case, the furniture, appliances, lawn care equipment etc. you buy would be an investment instead of a recurring cost.

g) Resale potential

Property finance experts consider investing in a home early a good sign is because property is considered a great asset. While it is important to do your research and buy a good property, buying one early means you can also resell it sooner, and hopefully, turn a profit. The art of house flipping is considered quite lucrative. Many buyers buy a house to sell it quickly at a much higher rate. So this is also another option to keep in mind.

As you can see, all the signs point to buying a house earlier being a wiser choice. Thus, calculate your savings and buy your first home today with interest free home down payment assistance from HomeCapital. Even if your down payment is larger, it will just mean that you gain possession of your home sooner. And then, the world is your oyster and there are so many options available to you. So go for it and invest with care.

Buying a home of your own: Short or long term decision for a first time home buyer?

Have you ever thought how will it feel to hold your own first set of home keys? Although fulfillment of this desire can be super-exciting, the thought of purchasing a house can be daunting especially when you are a first time home buyer. Dreaming of a new house is easy, but purchasing it needs a lot of hard work, determination, and in-depth research. Every individual has set some goals in their life where buying a house can top the list. It is up to you to decide whether purchasing your first home to be listed under a long term or short term decision. 

A first time home buyer has to have a good credit score, home down payment and mortgages in place. Based on your budget, you will have to decide whether you prefer a starter home or a forever home that may be larger. A wise decision can save you money and time. As a first time home buyer, you are not contained with sufficient knowledge and experience that is required to take such a huge decision. The following guide can help in your hunt for the right property. 

How much can you afford?

It is always advisable to buy a house that you can afford. In most cases, first time home buyer does not have sufficient savings to invest as a down payment. It is advisable to keep your complete house-buying budget within 30% of your gross monthly income. Living in a luxurious estate but being unable to cover various monthly expenses is not feasible. Plan and purchase your own house according to your requirements. If your income allows you to go for a small home, you should not wait unnecessarily for a bigger house. Live below your means and focus on affordability.  

Where do you want to live? 

The location of the property you are planning to buy is an important aspect that needs to be considered especially when you are a first time home buyer. The cost of the properties in different localities varies depending on the market rate. You may not be skeptical about the facilities and amenities you can avail of while choosing the location for your new home. But think about how far is the house located from your workplace and other social infrastructure. A lengthy commute can be a major disadvantage in this regard. 

Home ownership programs to help with financing 

The biggest hurdle for the first time home buyer is the down payment. This hurdle can be overcome by availing an interest-free personal loan from HomeCapital. They provide interest-free credit equal to your contribution towards the down payment that is perfect for the first time home buyer. The program helps to accelerate home ownership and purchase your desired home early in life. 

There are home ownership programs that can help you in making your wish of becoming a home owner come true. These programs include grants, loans, tax credits and many more. 

Starter home consideration 

  • Your lifestyle: Do you want to live in the center of the city or prefer living in the suburbs? If you choose the former, you have to settle for a smaller starter home as the locations are expensive. The latter option can give you the privilege of owning a luxurious real estate.
  • Your future needs: Your future needs change with time, and thus you will need to decide on your home configurations. Go for a starter home only if do not have any plan of taking major life-changing decisions within the next 3 years like expanding your family and the like.
  • Capital gains taxes: Buying a starter home for short term and selling it soon can lead you to owe capital gain tax that you have earned from the profit of selling the house.

Forever home consideration

  • Interest rates: You can wait for long to accumulate your savings for purchasing a forever home. Nobody can predict what will happen in the future. Thus, keeping track of the mortgage rates is essential.
  • Requirement of amenities: Housing complexes come with a plethora of amenities like gymnasium, spa, swimming pool, clubhouse, jogging track and many more. However, the cost of these amenities will be borne by you. Therefore, you should carefully weigh the need for these amenities and whether they fit in with your lifestyle
  • Your cash flow: While considering for a forever home you have to be sure that you can afford a larger down payment and your salary can support the monthly mortgage payment. Be sure to meet the expense of a larger house.

Thus, a lower-priced starter home makes it more attractive. Your starter home can become a potential future investment. You can put it on rent while you live happily in your forever home. Consider buying a forever home when you are well settled and financially sound. Choose wisely so that you can afford to spend on monthly mortgage repayment.

A bigger home down payment or a buffer in the bank

Is it better to avail the maximum amount of home down payment assistance even if you have a cash cushion in your bank? – This is a question that many first-time home buyers ask themselves. Buying a house for the first time is fraught with many choices. Overall, it can be a tricky situation to navigate. It might seem like there is no need to avail of the maximum down payment assistance if you have enough income coming in and a robust savings habit. Below we demystify the matter to offer some guidance. 

Plan well

The last decade has been an unpredictable one for global as well as Indian markets. From the Global Financial Crisis in 2008 to the soaring inflation at home, there are always unforeseen circumstances that might get in the way of your real estate and financial goals. Therefore, no matter how good you may be at trend forecasting, it is better to plan for the worst. One example of this is the current Covid-19 crisis that is rocking the entire world. Markets are in disarray and a second Global Financial Crisis looms. Even for those who had planned well, these are unprecedented events which could be mitigated only with smart and sound planning. Therefore, in the realm of home buying, taking as much home down payment assistance as you can get will keep your future that much more secure. 

Assess your options

While you may not think you require much home buying assistance, planning for the worst-case scenario in the current financial climate is key. It is what will keep you safe from the impending financial crisis. And getting the biggest home down payment is a wise decision given the current scenario because it will lessen the blow. There are many ways to avail of a home down payment assistance and a home loan without stressing on your finances. It is advisable to look at all your options. 

  • For first time home buyers, HomeCapital’s technology-based home down payment assistance program helps home buyers to avail half of the home down payment amount as an interest-free unsecured loan 
  • Depending on your income bracket, there are many government schemes that you can apply to. These include the Credit Linked Subsidy Scheme by the central government. There are also various state government-sponsored home buying schemes for first time home buyers where you can get assistance for down payments. 
  • Also, banks always have loans that you can avail of, in case you prefer to put your trust in financial institutions. 

Studying the options will only help you get a clearer picture of the kinds of assistance available. The chances are that you will realize it is a better choice to accept that financial assistance is important. So, in doing the research, you can pick a scheme or plan that will suit your requirements. 

The bigger down payment, the less to pay 

The most crucial point when it comes to home down payment is: the bigger the down payment, the lesser you have to eventually pay to own your home. This means that if you are short of the required home down payment amount, you can benefit from the HomeCapital program. The down payment assistance amount by HomeCapital is based on your credit history and monthly income. By availing the maximum amount that you are eligible for, you can avoid paying home loan interest on the same. This would be a wise decision to avoid paying back large sums. You would also secure ownership of your house quicker. 

Smaller monthly payments

When it comes down to it, if you take down payment assistance and go for a larger down payment, you pay a smaller monthly sum. So, if you are secure financially, it only makes more sense to use that sense of security to make your life easier for yourself.

Minimize borrowing

It is highly likely that you will have to take some sort of loan to pay for your home, no matter what your financial situation. In this case, a bigger down payment will help lenders have more confidence in you when you seek your home loan. This is because they believe they will be able to recover their money from you more easily in case you default on the loan. This is because their own risk is reduced, which makes it easier for them to decide to give you a loan. So, taking assistance to gain a larger home down payment sum would be much wiser. 

Better borrowing power

The bigger your home down payment, the more easily you can qualify for future loans. If you seek financial assistance for the down payment and make a larger home down payment, you will be paying smaller monthly payments. This means you would probably have enough monthly income to fulfil your financial obligations. This further means you would have a lower debt to income ratio, which would make future lenders more confident in giving you an additional loan. 

So, as you can see, with some planning, caution, and research, it makes a lot more sense to opt for financial assistance to secure a bigger home down payment. It would pave the way for a much easier future for yourself and make any potential borrowing much simpler. 

The perception of a home of your own

The perception of a place to call your own home varies among different age groups. The idea of home and the age at which you can buy one is constantly in flux. As per the BankBazaar Aspiration Index 2019, if you’re a young professional in your twenties, likely, you might not even believe you can afford one. In your late twenties and early thirties, you might be coming into your own professionally; this is generally when the idea of owning a home starts taking root. In your mid-thirties to mid-forties is when you would have the means and the desire to own a home. This is when you can make your dream of owning a home come true.

Below, we have isolated some trends that might help you understand the status quo.

Early years professionals

The early years of a professional career are when most young people entering the workforce concentrate more on saving a higher percentage of their salaries. Thus, the 22-28-year-olds who are just starting their careers have quite robust savings. This group is the most technologically savvy and are quick to adopt digital solutions. Their purchasing power isn’t very much. However, they would be quicker to adopt the digital solutions that would make house hunting, home buying and financial support for the same easier. It is also notable that this is also the newer generation. It has more of a sharing mindset, which can be seen as a barrier to purchasing. They prefer sharing and renting through services such as Uber, Airbnb, StayAbode and more.

Mid career professionals

Working professionals from the ages of 29 to 35 years old have a more significant purchasing power. This makes them more likely than early jobbers to seriously think of spending more money on experiences such as expensive holidays. It also makes them more likely candidates to want to purchase their own homes. Besides, they have more purchasing power and compounded savings than early jobbers to make this a higher likelihood. However, these individuals also feel that family responsibilities, high cost of living and limited savings keep them from achieving their financial goals.

Later career professionals

When professionals become more senior in their careers, they may have enough savings under their belt for their family and to go on expensive vacations. They may not have enough savings to yet buy the house they always dreamt of buying. By this point, a lot of individuals would be married and wanting to start or expand their family in their own home. This bracket has a mix of individuals that may or may not as digitally savvy as their millennial counterparts. They would be likely to seek out more traditional forms of financial assistance to realize their desire. Like mid-career professionals, they feel that family constraints, limited savings and high cost of living are barriers to their goals.

The gender perspective

When it comes down to trends, in terms of aspiration, there is a bit of a gap between men and women. However, it is not very large and hopefully, women will gain on their male counterparts in the future. In this sense, men have more in terms of earning power as compared to women who are the same age. So this means that men would be more inclined to have the ability to buy homes, given that their financial matters would be more sound.

Avenues to acquire the required financial aid

So when you’ve decided to buy a home, what bodies and organisations will help you achieve this goal? There are several options, depending on what you are looking for and are comfortable with.

Home Down Payment Programs

  • Technology is the great leveler and tech solutions can help with finding the requisite information to help with any quandary. In the realm of real estate, HomeCapital’s technology-based solution is one of the top available options for prospective first time home buyers to look for financial assistance. This is a good option for the home buying aspirants who have a deficit of savings and thus cannot provide for the total home down payment amount. The program provides half of the down payment amount as an interest-free personal loan that has to be repaid in 12 EMIs.   
    • Taking a home loan is essential while opting for the HomeCapital Program
    • Individuals within the age of 20 – 45 can avail of the benefits of the program. Thus, whether you are mid-career or later career professional, you can comfortably purchase your first house
    • To be eligible for the program, the prospective home buyer must be a resident Indian and have a stable income and have a sound credit history 

Real Estate (Regulation and Development) Act and other government housing schemes

  • The Real Estate (Regulation and Development) Act that was passed in 2016 is another ray of hope for prospective home buyers who are modest earners. It ensures that new home buyers with an annual income between ₹ 6 and 18 lakhs can claim approximately ₹ 2.5 lakhs of assistance. It is the central government that would offer this assistance towards the buyers’ home down payment. 
  • There are a number of government housing schemes available, regulated by state and central governments. Additionally, under certain schemes, preference is given to more vulnerable sections of society such as women. 

As you can see, the idea of owning a home varies from age group to age group. Younger individuals find it to be a less achievable goal. However, over time and as their purchasing power increases, it becomes an almost inevitable reality. Thus, you can easily trace the perception of home and how the idea of achievability of this dream evolves through one’s life.

How to brace for the annual increase in housing rent?

The basic necessity of humans to carry on living is via satisfying the three basic parameters of life namely food, clothing and shelter. The security of the roof above is incomparable. Robust demand accompanied has even witnessed the real estate developers to bid a price to the investors to explore in the field of renting.

Large metros in India invite thousands of people of several cities, states, villages and small towns all-round the year mainly due to fulfilling livelihood demands. The migration of these large chunks of people complementarily spurs up the demand for rental housing facilities. Additionally, just commencing to work does not leave many new members of the working population to buy a house at the go. Thus, every new day is witnessing the rental market boom like no other. The rush has lead to redesigning the service provided by the home builders to be landlords and have re-imaged the real estate sector.

The trend of national housing rent that is rising

The Reserve Bank of India (RBI) housing price index, has clearly highlighted the rising trend of housing rent prices throughout the past year. Around 11.09 million housing units all over India, especially in the urban areas, have institutionalized the long unorganized renting market in the country. A contribution of 13.5% by Maharashtra, 5.9% by West Bengal, 13.8% by Andhra Pradesh and 4.3% by Delhi to the total stock of the urban rental household sector is overwhelming. The blooming of India’s rental housing market space is further assured by some important segments of the market officially registering the rental yield of 4%. Tier 1 cities housing landlords have filed their yield much above 3%. Ahmadabad and Chennai have projected housing rent growth of as much as 0.7% and 0.4%. Although the highest growth in housing rent is marked by Bengaluru, Kolkata, Ahmadabad and Hyderabad.

Home down payment programs can help you relax about the house rent traction

HomeCapital has already captured the attention of the mass with India’s first Home Down Payment Assistance Program. Accurate analysis of the real estate market and being able to redefine and accelerate home ownership for first time home buyers have added to the credibility of the HomeCapital program. It has brilliantly submitted towards assisting people to cross the hurdle of home down payment and achieving their dream of ownership of an abode.

Your housing demand is sure to be assisted by the HomeCapital program. The following highlight the USP of their program:

  • Association of HomeCapital with leading real estate developers as well as reputed financial institutions have facilitated them to show the light of hope to a robust population of habitat seekers
  • The HomeCapital program is completely interest-free which is definite to lubricate the financial traction of a host of first-time home buyers. The interest of the regime is borne single – handedly by HomeCapital
  • The down payment assistance is in the form of a personal loan which is equal to your contribution towards the down payment
  • You are privileged to repay the credit principle amount in the form of equally distributed monthly instalments over a period of 12 months.

You can thus live your dream of purchasing your first abode in the near future without being forced to postpone the same owing to insufficient stocked savings. Thus, you can select the best of homes that is well-aligned with your taste.

Cost comparison between renting annually versus buying your own house

It is always wise to carry out a cost-benefit analysis of a rent versus buy scenario before plunging into any kind of contract. Especially, in case of financial decision making the importance of the same is unparalleled. Buying a house pushes people to get into a “less abundant lifestyle”, meaning cutting massively on various other expenditures for a substantial period of time. The motivation and will power be the other two major factors alongside the buying power that drives the decision to buy a house.

Consider the housing rent of a 2 BHK apartment in Mumbai to be around ₹50 thousand every month. As we advance in time, the cost is likely to elevate marginally. While on the other hand, purchasing a house with a home loan could fix your EMI at around ₹ 80 – 90 thousand a month. This amount may initially seem a higher amount than the monthly rent, but in the longer run it results in much higher savings. Real estate developers require you to pay a down payment while buying your house. According to the RBI, this amount could vary from 5% to 20%. HomeCapital’s program helps you with half of the down payment amount and helps you fast forward home ownership.  

Having a home of your own home is definitely a relaxation you would love to experience in the long run. Aging makes a person wiser and even cultivates their habit of spending, thus the EMI option might not look so burdening an idea. Moreover, rent just assures a month of shelter, while EMIs additionally take you closer to ownership. Walking on the path to get a self-owned house at the earliest with HomeCapital is definite to satisfy the feeling of ownership of a roof above your head. Psychologically, rent and landlords hovering every month are pretty disturbing. Don’t waste time; put your resources at the earliest to buy your first house companioning HomeCapital.

Top 5 home down payment myths debunked

When it comes down to it, buying a home is a challenging and daunting endeavour. And when you’ve finally picked the home you always desired, the often long, drawn-out process of making the down payments on your abode-to-be begins. So what’s the light at the end of the tunnel, here? It’s that home down payment assistance is a godsend for first time home buyers. The daunting process of being able to own your first home is made that much easier by the various schemes and programs available. And there are many to choose from if you only had the right assistance and could separate fact from fiction. So, to make it a little bit easier for you, let us walk you through the top five home down payment myths and why they are completely untrue.

Myth 1: You need 20% down payment to buy a home.

While the hunt for a home is strenuous itself, house hunters also fall prey easily to tales of enormous down payments. And somehow, quite a substantial number of first-time home buyers are under the impression that they need to provide 20% of the home down payment to buy the home they desire. However, this is patently false and should not be something to concern those who are house hunting for the first time. While 20% is a commonly quoted figure, lenders are more than happy to accept a home down payment starting at a mere 5 %. So please rest assured, your desirable home can be yours without you needing to arrange for a crazy amount of money or paying an arm and a leg.

Myth 2: It is difficult to qualify for home buyer programs.

A lot of people on the house hunt for the first time are stressed because a prevalent myth is that it is hard to qualify for home buyer programs. However, there are several schemes that prospective first time home buyers can take advantage of. For example, in 2019 itself the government extended a loan subsidy scheme under the RERA Act 2016. It was extended for a year for first time home buyers who an annual income between ₹ 6 and 18 lakhs per year. This particular scheme meant that new home buyers would be entitled to about ₹ 2.5 lakh worth of assistance from the central government towards their home down payment. As you can see, this means there is nothing to worry about since this and more schemes exist to benefit a wide variety of first time home buyers. 

Myth 3: Down payment programs aren’t available in India.

One prevailing myth that many prospective first time homeowners in India labour under are that there aren’t home down payment programs in India. As already stated, this is untrue and a myth. For example, HomeCapital’s tech-based solution is India’s first Home Down Payment Assistance Program. Our digital offering reduces the burden on first time home buyers, offering them a transparent approach to calculating their down payment assistance eligibility for a variety of offerings. HomeCapital allows first time home buyers to apply online for a home down payment assistance for half of the home down. The assistance is based on the home buyer’s income and credit history. The assistance is in the form of an unsecured loan which is interest-free. With data and digital capabilities as their tools, HomeCapital leverages technology to fast track home buying for house hunters. 

Myth 4: It’s too expensive to buy a home in my market.

When it comes down to it, the current market scenario, inflation, and the millennial mindset of renting everything and never buying have led to a certain trend of thinking: it’s too expensive to buy a home. This, however, is yet another myth. Under the numerous schemes from the government as well as the various assistance programs and loans available, it is possible to own your own home. With the right assistance, backed by research and due diligence, owning your first home is within the realm of possibility. Besides, once you own property, it is a high performing asset, through which you can earn a passive income by renting out, which is highly lucrative now in the era of the sharing economy. So, not only is owning your own home within your grasp, but it can also be an investment in future income. 

Myth 5: Down payment programs make home financing more difficult.

Buying a home is possibly going to be the largest investment or payment you will ever make. And getting all the assistance you can get is only going to be wiser. In the case of choosing to opt for a down payment program, you will have to demonstrate being financially responsible. This means having an impeccable credit score as well as filling out the online application. You will also have to do your research to be able to say with full clarity that you have made the right choice. This can seem daunting, especially when you are already overwhelmed by the process of hunting for your first home. However, these are just the necessary stepping stones to access a good home down payment program, which will ensure your first home is within your grasp. This is also another reason why the HomeCapital program is a good option. It will assist you in your research with offerings from leading developers they have tie-ups with, to find you your future home.

All in all, while searching for a home is a long, involved process, with many moving parts, at the end of it you are blessed with a place to call your own. So, do the research and take the best assistance you can, while enrolling for HomeCapital’s Home Down Payment Assistance Program. It will ensure that your accelerated home ownership for you and your loved ones.