Buying a home is a significant investment that not only gives you the luxury and peace of mind of owning your property but also builds a healthy investment corpus. In this regard, home loans are your best choice to procure the house of your dreams.
All you have to do is meet the eligibility criteria and accumulate a generous buffer of margin money so that you get the best deal on home loans, including the lowest possible CERSAI charges.
Wondering how PF withdrawal and savings can help you create margin money for home loans? Read on to find out in this post!
Margin Money in Loans: A Brief
When you apply for home loans, you get an approval of 70-80% of the home value as a loan. The remaining amount that you need to accumulate from your savings is termed as margin money. The higher your margin money, the lower will be your home loan amount, the rate of interest applied to home loans, the monthly EMI amount, and the total interest charges on your loan.
How to Find Out the Right Amount of Margin Money?
The best way to figure out the right amount of margin money is to use a home loan EMI calculator. All you have to do is enter the home loan amount you need, the tenure you need it for, and the interest rate the financial institution offers.
The results give you an estimated EMI amount and the total amount of interest charges levied on your home loan. If you feel that the amounts are unaffordable and don’t fit your budget, the best alternative is to increase your margin money in the loan amount, which will automatically reduce your loan amount. This further leads to lower EMIs and lower interest charges.
Example:
If your home costs Rs. 1 crore, and the loan approval is 80% of the amount, this means that the remaining 20%, i.e. Rs. 20 lakhs, is the margin money, which should be arranged by you.
How Can Savings and PF Withdrawal Help You Collect Margin Money?
Firstly, assess how much savings you have – whether in cash, bank accounts, or kind. If you have saved a bulk amount, you are ready to purchase a home, as this can serve as the margin money or down payment that is required to initiate your home loan.
One of the most recommended ways to arrange for margin money is to withdraw your Provident Fund amount for a hassle-free and easy home loan procurement process. Your PF is maintained by the Employees Provident Fund Organisation (EPFO) functions under the Ministry of Labour and Employment of India which provides a lump sum amount to employees when they retire.
You can depend on a PF withdrawal home loan after serving in your employment for five years. You can withdraw 24 months of basic salary plus Dearness Allowance (DA) (in case of land purchase) or 36 months of basic salary plus DA (in case of home purchase/home constructions), or the down-payment amount required for the home loan, whichever is lower.
There has been an update on the withdrawal of the PF amount, according to 68BD in the EPF Scheme, 1952. Now you can withdraw up to 90% of the PF balance for 60 lakh home loan emi margin money or EMIs. You simply need to submit the required documents and apply for a withdrawal.
How to Withdraw PF Online?
Simply follow the steps mentioned below:
Step 1 – You must visit the official UAN portal and authenticate and link the Aadhar card as issued by the employer
Step 2 – Visit the EPF website and fill out the withdrawal form online
Step 3 – Fill in your bank account details which should match the ones given on your EPF account
Step 4 – Your PF amount shall be credited to your account within 15 days.
Other Ways to Increase Your Margin Money
Here are some other ways that will help you decrease your loan amount and increase the margin money in loans:
Identify Your Investments
If you have invested in long-term financial products like Insurance, stocks, shares, land, gold, or any other form, you can break them and invest the same amount of money in your new home. The interest you were earning on these investments can compensate for the interest charges you would be paying for your home loan.
Borrow from Friends and Relatives
This is the least recommended option; however, when you have nowhere to turn to, you can consider borrowing from close family members or friends as a last resort.
Conclusion
The above-mentioned options are your best choices when it comes to increasing the margin money in loan amount that can get you the best deals in home loans from financial institutions.
Make sure you only apply for home loans when you are fully prepared – i.e. you meet the eligibility criteria, have a good credit rating, have all your documents in place, and have arrangements for a bulk margin money so that your home loan can be approved with the lowest interest rates.