Buying a home? How to choose the right payment plan? Property Location

Buying a home? How to choose the right payment plan?

  • 13 March 2019

Purchasing a home is one of the most significant events for a buyer. The decision to buy your own house is a huge one to make as it involves large sums of money and as such must be made with a clear, rational mind, with total understanding and study of the processes and risks and a structured plan for payment.

Once you have set a budget and made an initial selection of the property, then the process of how to fund your property, the best home loan options, the amount of loan your salary slip will make you eligible for, your monthly EMI calculator etc. all takes centre stage.

With many home loan options from reputed housing loan companies available, acquiring the funds to buy that house has become easier than before with a lot more payment plans to choose from. So let’s take a look at the multiple payment plans a home buyer has and their pros and cons.

Apart from the traditional down payment method, other payment plans include Possession Linked or Construction Linked Plan, and Time Linked Plan.

Possession Linked or Construction Linked Plan

This is a payment plan where the buyer pays around 10% of the price as a booking amount. Then the remaining payment (certain percent each time) is made by the buyer to the builder in slabs as and when the construction progresses or at every stage of construction.

This is one of the most popular payment options among buyers as it is not time linked and the payments have to be made only when the builder delivers a construction phase thus the onus is on the builder to complete the construction in the stipulated timeframe. The only downside to this payment option is that the buyer often ends up paying more interest to the lender (mostly it is the bank) as the time period is lengthy.

Time Linked Plan

Not the most popular plans among buyers, but less risky than the down payment plan, time linked plans require the home buyer to make payment in installments according to a set time frame decided by the builder, say pay 10% now, pay 20% in 2020, and pay 70% on possession. Generally builders offer a discount of 8-10 % on the basic cost of property if the buyer opts for this payment plan. As the buyer is bound to make payments as per the builders preset timetable, unlike a Possession linked plan, this payment plan does not put the onus on the builder to complete the construction in a time bound manner.

Payment is, obviously, one of the prime worries for a home buyer. In order to not lose potential customers these days many developers and builders are offering a variety of payment options to home buyers. Many builders even offer payment incentives along with the property at the time of booking.

Of course, when applying for the loan make sure that you read that fine print, assess the benefits against penalties of the payment plan and select the plan that works best for you!

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