A risky venture like buying a home requires a great deal of emotional and financial considerations. But most importantly, are you confident if such venture is worth taking the risk? Read these points and evaluate yourself if you are ready to buy a home –
If you don’t intend to apply for a home loan, then you must seriously consider down payment and personal savings, as they are crucial factors influencing your decision in a big way. Your payable down payment should be 10% of the value of your property as savings because lending institutions in India don’t grant finance beyond the reach of 90% (most banks grant 80% of the loan against the home to be purchased).
To this context, your savings or ready-made funds in hands determine your eligibility for payable down payment.
Examine your financial condition
As self-explanatory as it may seem, a healthy financial condition is literally a cog in the wheel for determining a hassle-free EMI payout against home loans. That said, your financial condition is one key criterion on which your bank will measure up your repayment capacity and on the basis of it the lender will finally sanction or turn down your loan request. Moreover, a careful study of your current financial condition will help you learn whether you can afford EMI outgo without defaulting on the same.
Do you know a systematic upkeep of debt-to-income ratio will eventually help you figure out your repayment capacity for a loan taken?
This is a great, workable financial strategy you need to work on. An important reason to consider this tactic is to evaluate your status based on your current financial condition, which is undoubtedly a yardstick for determining your repayment capacity. Remember, you will mess up your credit score if you keep on defaulting on your EMIs.
Therefore, it is wise to predetermine this factor before you opt for buying a home by means of a suitable home loan.
Usually, a debt load of 30% is something you can stand but you can’t stand if the same goes up to 50% that is a reasonably tougher liability for someone without healthy income backups.
The purpose of buying a home
Do make some homework and try to introspect the purpose behind buying a house. Well, some people buy for residential purpose while there are those who prefer it for commercial purpose. Either way, it is must to gauge the tenure for which the property is purchased. An extended tenure will consume a big chunk of your life’s ages in repaying EMI against your home loans.
Therefore, go for long term home loan (20-years, for example) if you think you can sustain such a prolonged repayment cycle. Otherwise, look for short term loan to buy property for investment purpose. Study closely the associated risks and your capacity to afford a short-term loan.
Take a serious look at your job
Never go for a home loan on the basis of unstable job, especially if you are a salaried individual. If there is no stability in your employment and you end up changing it often due to certain reasons, it is advisable not to opt for a home loan. You will end up jeopardizing your credit score by defaulting on repayment of the loan.
The condition of your employment directly links to your capacity for repaying the loan. How can you repay if your source of income (job, for example) is volatile? It is vital to prepay overdue EMI before the end of the tenure, and your unstable employment will be the biggest deterrent to fulfilling that liability.
Even for businessman, seeking a home loan is not advisable if he/she lacks comfortable flow of income.
Apart from the above-mentioned factors, study the followings:
- As one of the tips to buy a home, ensure if your home loan carries some tax exemption benefits. Though such exemption is subjected to change upon the release of Union Budget, however, pay attention to details regarding tax benefits available on your home loan. According to prevailing legislation, you can avail tax benefit of nearly Rs 2 lakh on your home-loan-funded property. Even Section 80C grants deduction of nearly Rs 1.5 lakh repaid principal.
- While buying a home, don’t forget to study extra costs over parking payment, stamp duty etc. These costs will burn a hole in your pocket. Therefore, prioritize your budget accordingly.
- Your bank can slap processing fees on your home loans for conducting verification of the property you want to purchase. To some extent, such expense is worth the deal, considering bank deploys its field staff to evaluate legal status of the property, and if it is okay, your loan is sanctioned. At the end of the day, upon rejection, you get to know the property was illegal, thus saving you from many agonies you would have felt later in future.
Buying a home is a great deal of financial and emotional decision. Therefore, it requires a lot of careful pre-plannings and various strategies in place. Consideration taken in advance of buying a home will eventually help you sort out many issues you may encounter during the process.