The real estate market has appreciated exceptionally over the last decade which is making it hard to own a home if you solely depend on your savings. In such cases, a home loan can be a boon, and purchasing or building a home from scratch with a 100% home loan is a dream come true for first homeowners.
When dealing with real estate, you have to know a few things. One of the things to know is to carefully estimate the amount of loan you should take to buy a house. We all want to own a house, but not everybody can buy it without the help of a loan. Furthermore, credit scores are the most significant eligibility factor for one to obtain a home loan. So, there have been questions arising, and one common question is whether it is possible to get a 100% home loan. Well, this article will provide answers.
What’s a 100% Home Loan?
A 100 percent home loan is a mortgage that handles the whole cost of purchasing a home. As a borrower, you don’t need to make the down payments. Though, a down payment is not a hindrance to a homeownership. This type of loan is rare and typically comes with strict eligibility requirements.
While a 100 percent home loan might be appealing to some applicants, this option also comes with high-interest rates and other charges. Therefore, consider your options and then work with a renowned lender to make sure you’re getting fair loan terms.
Can You Get a 100% Home Loan?
Most banks and financial institutions do not provide a 100% home loan. Many banks will give you about 75 to 90 percent of the loan amount, while the rest will be raised by yourself. This implies that if your home will cost Rs. 60 lakhs, and the bank is paying the loan, which equates to 80 percent of the sale price, you have to pay Rs. 12 lakhs by yourself. Normally, about 10 percent of the agreement value is used as a down payment.
If you can’t make the down payment amount, it can be assumed you do not have enough savings. You will be required to wait for some years till you have money to pay for the down payment; that’s when you can be allowed to apply for the loan. Normally, banks do not give a 100 percent home loan when you want to buy a house. You will have to make a down payment by yourself, and then they will loan you the amount of the sale price.
Why It’s Challenging to Get a 100% Home Loan in India?
The Reserve Bank of India regulates the Loan to Value, and according to the bank’s rules and regulations, you can only receive a certain amount of the total cost of the property. The borrower must fund the remaining money. All registered lending institutions must follow these guidelines while giving home loans to borrowers.
According to the regulations, the lender will provide up to 90 percent of the property’s total cost if the cost is less or equal to Rs. 30 lakhs. But, if the cost of the property is more than Rs. 30 lakhs but not more than Rs. 75 lakhs, the lender will approve 80 percent of the home loan. On the other hand, for a property costing more than Rs. 75 lakhs, only 75 percent of the total cost of the property will be offered.
Alternative Option to Funding Your Home Project
As said, the lenders cannot give you a 100 percent home loan. So what to do? Even though you have an option of waiting for a few more years to be able to pay the downpayment, it isn’t an option. As the saying goes, time waits for no one. It is upon you to act quickly when you still have the opportunity.
Fortunately, you still have an option to acquire funds to buy your dream home. That is by getting a personal loan online. The application process is very easy and fast. You’ll get your funds in your account the same day. The amount you can get will depend on your score, your income, repayment capability, etc.
lendingplate is a popular lender with affordable loans disbursed within hours once approved. In addition, you can also get loans against term deposits, which normally come at a lower rate and are easier to get. With a down payment available, you will be able to arrange the remaining payment to purchase your home.
Is The Idea of 100% Financing Good?
Ideally, 100% home loan financing is a good step if you wish to save some money in your account. It is risky to spend all your savings to settle the down payment. A rule of thumb is to at least have your six-month income saved in the emergency fund in case of unexpected situations like job loss, illness, etc.
The benefit of purchasing a house without a down payment is that the amount from the loan will be huge. So, ensure you are comfortable with the mortgage payments.