Pinnacle

With salary levels zoomiing to statospherical levels, its no surprise that the salaried class is being wooed by HFC's for fancy home loan packages. And its been a complete circle.
People can now afford to buy luxury homes due to this BigHome Loans that are offered by HFC's.

But for many, the problem is to bring in margin money to the tune of 10 - 15% percent of the loan amount. With most of their savings locked away in various funds and stocks, raising this money within a few days seemed next to impossible. There are many people who either do not want to dissolve their portfolio or do not have enough money to pay the margin money upfront.

Here are a few ways in which a borrower can raise a few lakh to pay upfront for his home loan.

What is margin money?

Banks lend out huge money in the form of home loans. Margin money can be best described as an upfront down payment that reassures the lender of the borrower's financial stability and commitment. The upfront down payment can range from as low as five to as high as 15 percent. In case of Ramakanth's loan, it comes to around Rs 4 lakh.

For those who have excess funds in hand, consider making a larger down payment. This will bring down your loan amount and consequently your monthly EMI outflow. For those who are uncertain about their job security, this would be the best thing to do. With a reduced tenure or reduced monthly repayment burden, the possibility of defaulting will be minimised.

Finance against securities

Some lenders are contented if you pledge liquid financial assets like shares, securities, fixed deposits and insurance policies with existing high surrender values. This can be considered as an alternative to the 10-15 percent margin money that the borrower has to bring in. It is also possible to obtain a loan against the surrender value of your life insurance policy from the life insurance company. Taking a loan from your employees provident fund account if you had such an account for more than five years, is yet another alternative.

Loans against securities entitle you to instant liquidity without having to sell your securities. Once you pledge your securities in favour of the banker, an overdraft facility up to a value determined on the basis of the securities pledged by you will be provided. A current account will be opened and you can withdraw money as and when you require. Interest will be charged only on the amount withdrawn and for the time span used. Loans are offered against demat shares, RBI Relief Bonds, mutual fund units, insurance policies, UTI bonds, NSC and KVP.

Loans against shares

For loans against shares, the borrower has to execute a transfer deed along with the certificates. There will be processing charge of around 1-1 .5 percent. Further, the whole process may take up to a week's time.

Personal loan

If all you seek is convenience, go for personal loans. They may be more expensive by a few percentage points, but the whole loan process is extremely smooth. Available for both salaried and self-employed, from as much as Rs 20,000, you can get up to Rs 20 lakh sanctioned. The loan tenure will typically be only 5-10 years and not more than that.

If you take a personal loan to pay the margin money, it is always better to close the loan when you have excess funds. This is because a personal loan is very expensive and this could heavily add to the monthly outflow towards home loan repayments.

manpreet

good suggestions for home loan seekers .........