Home Loan

How To Raise Funds To Make The Down Payment On Your Home Loan


It can be challenging to save for the down payment of a new home. And, it’s not always easy to track your expenditures and figure out the best way to set aside money for a specific purpose. Fortunately, there are plenty of ways to raise funds for your home purchase that don’t involve selling valuable assets or taking out a mortgage on your primary residence. 

Here are six ways to raise funds to make the down payment on your home before you apply for a housing loan.

How Do Home Loans Work?

When you apply for a home loan, the lender will ask you to put down 20% of the amount you plan to borrow. In other words, the rules mandate that buyers make a payment of up to 20% of the home’s value as a down payment. Only then can the bank or lender process the home loan for the remaining 80% of the amount. The rule applies to all cases where a loan of more than Rs. 30 lakhs is needed. 

When looking for a home loan, you must consider two critical things – interest rate and the repayment period. A home loan involves large sums of money. As a result, you must have a long enough repayment period to repay the money without financial trouble or ruin. At the same time, you must look for the best deal for the house loan interest rate. In some cases, you will be paying off the loan for a long time – decades. A high-interest rate would result in you paying a large interest over that period. 

Here are some ways to arrange the down payment for the clearance of the loan: 

  • Take a Personal Loan For Down Payment

In this scenario, you apply for a personal loan and put a portion of the amount you borrow as a down payment. A personal loan isn’t purpose-specific and you can put it to use the way you want without interference from your lender. Therefore, it is legally possible to use your personal loan for the down payment on your new dream home. 

If you are taking a personal loan for the down payment, you must remember two things. One, a personal loan is given for a relatively shorter term when compared to other types of loan, including a home loan. Two, a personal loan has a higher interest rate than a housing loan. These two points must be factored in when you are considering taking a personal loan for a down payment on your new home. 

  • Take a Gold Loan For Down Payment

If you have an existing relationship with a gold lender, you can create a gold loan for your down payment. A gold loan is an unsecured loan secured by your existing assets. In this scenario, you borrow a portion of your gold as collateral for the loan. Once you apply for the loan, the gold lender will determine your eligibility, down payment, and the amount you can borrow. Once approved, you will sign an agreement with the lender. The agreement will detail the loan terms and conditions.

  • Borrow From Friends & Family For Down Payment

Another way to fund a down payment is to borrow funds from friends and family. It can be a great option if you already have a network of friends and family to seek a loan. One of the advantages of borrowing money from friends and family is that you will not be charged interest in most cases. Therefore, you can target your income and savings towards paying interest on the home loan that you plan to take. It is also better than a personal loan as the repayment will be flexible given the informality of the transaction. 

  • Withdraw From PPF Account For Down Payment

You can withdraw funds from your Public Provident Fund (PPF) account for use as a down payment. It can be a great option if you have been contributing to your PPF account for some time and are now ready to withdraw the funds. If you want to use your existing contribution to fund a down payment, you need to withdraw the amount from your PPF account. 

The other way is to borrow against your PF money. PF account holders have the option of getting a loan against it. Moreover, the government allows partial withdrawal if the money is used to purchase a house. If you want to go with the loan option, it will be available only if you have completed five years of service.

  • Sell An Asset For Down Payment

Another way to raise funds for a down payment is to sell an asset. Even if you don’t make much money from selling an asset, you can use the proceeds to make a down payment on your home. You can even borrow against the value of the home you sell to make the down payment. You can also consider selling a piece of land you inherited from your family or shares gifted by your parents. These assets are created for difficult times and can be used when buying your dream home. You can reinvest in these when you have a home and save the rent.  

  • Take a Loan Against Your Life Insurance Policy

It is one of the most surprising ways to raise funds to make the down payment on your home purchase. You can use the loan against your life insurance policy to make a down payment on your home purchase. If you do not have a large insurance policy, you can take a loan against small ones to make up a part of the down payment. It could reduce the burden significantly. 


Home is one of the most important things in a person’s life. It represents security, stability and comfort. Although it is an expensive investment, it is important to plan for your future and ensure you can afford it. There are many ways to fund a down payment on your home purchase. A home loan is cleared only when the applicant has made the down payment for the property. 

Read more blogs like this on the Piramal Finance website to learn more about housing loans. You can also take a look at the products and services they offer.