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.
4 mins
12 Oct 2022

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 aren’t 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 tenor, higher initial investment and a safe financial tool that won’t 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 tenor. 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’s 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 tenor based on when you want to purchase the house you can use the online FD calculators provided by various FD providers 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’s what your investment would look like if you invest in Bajaj Finance FD which provides one of the highest FD rates up to 7.95% p.a. along with the highest safety ratings and a suite of other benefits.

1. Citizens below 60 years of age

Initial Deposit

Tenor

Interest Rate

Maturity Value

Rs. 15,00,000

60 months

7.50% p.a.

Rs. 21,43,447

Rs. 18,00,000

60 months

7.50% p.a.

Rs. 25,72,136


2. Senior citizen

Initial Deposit

Tenor

Interest Rate

Maturity Value

Rs. 15,00,000

60 months

7.75%

Rs. 21,68,510

Rs. 18,00,000

60 months

7.75%

Rs. 26,02,212


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.