Smart Ways to Use Fixed Deposits When Planning for a Home Loan

Did you know over ₹190 lakh crore is currently invested in fixed deposits across India? This makes FDs one of the most trusted and popular saving instruments among Indian households. While traditionally used for secure returns, many homebuyers overlook their potential to strategically support home loan planning.

Let’s explore smart ways to use fixed deposits while planning for a mortgage. We’ll cover the best FD rates, how to take a loan against an FD, and how to align these with your home financing goals

Understanding Fixed Deposits

A fixed deposit is a financial instrument where you invest a lump sum with a bank or NBFC for a fixed tenure at a predetermined interest rate. Unlike a savings account, the money is locked in for a fixed time duration, and you earn higher returns.

Key features include:

• Assured Returns
• Low Risk
• Flexible Tenure
• Loan Against FD Facility

These features make FDs a smart tool when planning large-scale financial decisions such as buying a house.

5 Smart Ways to Use Fixed Deposits for a Home Loan

Fixed deposits can do more than just grow your savings; they can actively support your home loan journey in several strategic ways. Here are five practical methods to use FDs smartly when planning to buy a home:

1. Boosting Home Loan Eligibility with FDs

When applying for a home loan, lenders assess your income, liabilities, and repayment capacity. Having a fixed deposit strengthens your financial profile, indicating stability and discipline. This can positively influence your eligibility for higher loan amounts.

Keep your FD account active and updated when submitting your home loan application.

2. Using FDs as Collateral for Loan Against FD

Instead of withdrawing from your FD for a down payment, consider taking a loan against it. You can typically borrow up to 90% of your FD value at a lower interest rate than unsecured loans.

Benefits of a Loan Against FD:

• Best FD interest rates compared to personal loans
• No need to liquidate your investment
• Quick processing and minimal documentation

This allows you to retain your investment while gaining liquidity for immediate home-buying expenses like down payment or registration charges.

3. Paying Pre-EMIs Using Interest Earned from FD

If you're buying an under-construction property, you'll likely pay pre-EMIs (interest-only payments) until possession. By aligning an FD with this timeline, the interest earned can be used to pay these pre-EMIs—reducing pressure on your monthly budget.

4. Creating an FD for an Emergency During Loan Tenure

Financial stability is essential when you're repaying a long-term home loan. Having a separate FD can serve as a safety net during emergencies like job loss, illness, or business disruptions.

This fund can be used to continue EMI payments and avoid credit score damage or late penalties.

5. Invest in FDs while opting for Home Loans with Lower Interest

If the interest on your home loan is lower than what you're earning from your FD, it might be better to keep the FD and take the loan. Your money keeps growing while you handle the loan repayments efficiently.

Example: If your FD earns 7.5% and your loan rate is 8%, the marginal cost can be offset by liquidity benefits and compounding gains.

How to Apply for a Home Loan and Use FD Efficiently?

Here’s a smart plan to align your FD investment with your home loan journey:

1. Evaluate Home Loan Options: Visit the IIFL Home Loan to explore flexible options tailored for affordable housing.
2. Use the Home Loan EMI Calculator: Calculate your repayment capacity using the Home Loan EMI Calculator.
3. Build a Fixed Deposit Portfolio: Choose FDs with maturity timelines to serve different home-buying milestones.
4. Opt for a Loan Against FD if Needed: Instead of breaking the FD for lump-sum expenses, opt for a secured loan against it.
5. Link Your FD as Collateral (Optional): You can get low home loan rates if you keep FD as collateral, especially if you're self-employed or have limited income proof.

Wrapping Up

A fixed deposit isn’t just a simple savings option, but it’s a powerful financial asset that can work alongside your home loan goals. FDs offer the right mix of stability, flexibility, and strategic advantages to help you boost your loan eligibility, save for a down payment, or build a reliable emergency fund. By aligning your fixed deposits with your homeownership plans, you can ease financial stress and make smarter decisions.

So, are you ready to take the next step? Explore flexible and affordable accommodation funding options with IIFL Home Loans. Let your money work for you and change your dream house into a reality soon!