The only thing not-so-good about property purchases is that these transactions cost a lot. And even when there is help at hand in form of home loans, you still need to bring in 20% downpayment from your own side. And that is tough given that 20% too is a large amount. For a property of Rs 50 lac, the down payment itself is Rs 10 lacs.
So how should you get this down payment amount?
The correct approach is to save for it. But if you haven’t managed to do that, then you can still take another route – personal loans. And with interest rates falling and expected to fall more in near future, this actually makes a lot of sense.
But you need to be aware of certain constraints of taking other route.
When you take a home loan, you have an EMI to pay every month. But if you also take a personal loan for downpayment, then you will have two EMIs to pay every month. Lenders generally don’t allow the ratio of EMI-to-Income to exceed 40%. This means that the sum of all your EMIs should be 40% or less of your income.
So for a house of Rs 40 lac, you will get a home loan of Rs 32 lac. This means an EMI of Rs 28,791 (loan tenure – 20 years, interest rate – 9%). The remaining Rs 8 lac is needed for downpayment. If you take a personal loan for this and want to pay it off in 4 years (at 16%), then that EMI will be Rs 22,672.
So the total EMIs will be Rs 51,463. So if we reverse calculate, then we get to know that your monthly income should be about Rs 1.3 lac for lenders to approve two loans with combined EMI of Rs 51,463 (which is 40% of your monthly income).
So its clear from above discussion that taking a personal loan for downpayment is fine. But it reduces your ability to take a larger home loan.