Start saving for your home loan down payment. Open an FD

Know how you can save for your home loan down payment with the right investment.
FD for Home Loan Down Payment
4 mins
03 January 2024

There has always been a great focus on the need for savings when it comes to financial management. It is extremely important to understand why savings hold such an important place in any financial dialogue. Since finances cannot be generated overnight, it requires years of sincere and dedicated planning, saving and choosing the right investment tools. Just savings are not enough. Stashing away your windfall income, bonuses, appraisals, and surplus income in a stable savings account might seem an obvious choice for many. Solely from the purpose of accessibility, safety, etc. But, it is of paramount importance to understand that idle savings are a killer of money. They do not stand a chance to beat inflation and your money loses value over time. To see growth in your corpus you must invest it in the right tool. It could be stocks, mutual funds, bonds, or fixed deposits, etc. Choosing the right tool can be confusing but it can be simplified if you break it down and trim the options based on your risk appetite and financial goal.

Say your financial goal is to save up for the down payment of a house you are planning to purchase in a few years. In this case, this is a critical life goal that requires a longer tenure, higher initial investment, and a safe financial tool that will not erode into your capital. You would not want to risk losing your house down payment savings in a market-linked instrument. Since this is a huge amount, you would want it to be parked safely. Most individuals might just want to keep parking the excess funds in their savings accounts. But, setting aside money in a savings account isn’t enough you must invest it elsewhere. In this case, the Fixed Deposit is a perfect tool to invest in. Fixed Deposits give guaranteed returns at better interest rates than a savings account. They come with a lock-in period that helps in maintaining the discipline of not using your savings elsewhere other than the designated goal.

The best part about investing in an FD when it comes to goal-based savings and investing is that you can estimate your returns even before you choose to invest. This is because when you book an FD you lock-in the interest rate for the entire tenure. The fluctuations less or more that might occur to the FD interest rates do not have any effect on your booked FD. This makes it an excellent choice for those looking to set aside a chunk of their savings for their home loan down payment.

Consider that you want to purchase a house in the next five years and want to apply for a home loan that would require a sizeable down payment. Instead of parking your funds in a savings account, you can grow them securely at a far better rate with an FD. Here is how.

Based on current property rates you can, estimate the cost of your home loan down payment. Say you like a property worth 1 crore. You have eligibility for a loan worth Rs. 80 lakh. This means you will have to clear a down payment of Rs. 20 lakh. This is no small amount to get there you need disciplined saving along with investing. Once you set aside an initial investment amount, and choose the tenure based on when you want to purchase the house. You can use the online FD calculator to calculate till when you can get a maturity amount of Rs. 20 lakh. The best part about using this hassle-free calculator is that you can align your investments based on your goals by changing values till you get the desired results.

Here is what your investment would look like if you invest in Bajaj Finance FD, which provides one of the highest FD rates up to 8.85% p.a. along with the highest safety ratings and a suite of other benefits.

1. Citizens below 60 years of age

Initial deposit

Tenure

Interest rate

Maturity value

Rs. 15,00,000

60 months

8.05% p.a.

Rs. 22,09,099

Rs. 18,00,000

60 months

8.05% p.a.

Rs. 26,50,918


2. Senior citizen

Initial deposit

Tenure

Interest rate

Maturity value

Rs. 15,00,000

60 months

8.30% p.a.

Rs. 22,34,774

Rs. 18,00,000

60 months

8.30% p.a.

Rs. 26,81,728


So, for instance, you can grow your wealth by Rs. 7 lakh over five years with a deposit of Rs. 15 lakh. This can help you understand how to go about your investments.

When such huge figures are involved, safety becomes a primary concern. But, when it comes to safety, the Fixed Deposit is one of the most stable fixed-income instruments that investors have been vouching for ages. With this information, you can confidently start saving for the down- payment of your home loan.

Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.