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Tips on financial planning to buy a new home
If you are looking to buy a house on loan, then you would already be doing a lot of information gathering, verifications, site visits, etc. So to help you in your endeavor, we offer you few financial planning tips to purchase your first home:
· Information is power, but self-assessment is the key. And in case of home loans, it can help you save a lot of money in the long run. Before you even start looking for properties, its best to assess exactly how much can you afford to pay, given your current financial circumstances. If you already have a major chunk of your income going towards servicing EMIs, then you first need to clear some of your loans before you can even think of purchasing a home.
· Once you know what level of debt you are comfortable with, get in touch with various lenders to see how much loan do you qualify for. It’s possible that you might think that you can afford a Rs 50 lac home, but lenders might think that you are only good for Rs 35 lac loan – which depends on many factors like how much debt you already have, your monthly income and its stability, your existing financial assets, credit history, etc.
· At times, lenders might be ready to give you a loan for more than what you actually need. This can push you towards taking a bigger loan needed. Don’t do this. Buy what you need and not what bank or other lenders tell you. Choose a loan that you’re able to service comfortably for years.
· Lenders want borrowers to pitch in with about 20% of the house cost as down payment. So if you don’t have anything saved up for an initial down payment, then don’t bother applying for a loan. Start saving for the down payment immediately.
· Most people forget to add the hidden cost of real estate ownership when the calculate their monthly expenses (which includes EMIs). There are maintenance costs, utilities, taxes, etc. Always consider these costs when you are evaluating your monthly outgoes due to loan EMIs and other house related expense heads.
Home-ownership is a beautiful experience in itself. But if you have not planned your finances properly, it can be a nightmare that lasts for many years. So make sure to remember these tips before you buy that dream home of yours.