Financial Aspects you must consider before Buying a Home
Having a place you can call your own is a dream – a long-term one for most of us, especially in big cities like Hyderabad. Big city, so many areas, so many different influencing factors, and a wide variety of options to look at. The process of zeroing in on the ideal place is long, time-consuming, and sometimes not as simple as it can be. An important area to note is the various financial aspects you need to consider before finalizing the purchase of the house of your choice and liking.
Apart from security and a status symbol, a house also denotes a good investment. To make it easy for you, we have put together 6 financial aspects you must consider before buying a home:
Debt to income ratio:
In layman terms, it tells you about the income you will have in hand after paying your monthly bills and your house’s EMI. You also need to keep in mind your car loan’s EMI, insurance, and any other regular payouts while calculating your expenses. The idea ratio is not more than 36%, and this ratio also helps warn you from stretching yourself when going in for a home purchase.
Besides the cost of the house, which is in per square foot rate which depends on the locality, add the registration cost, stamp duty, service taxes, maintenance, insurance, and the utility interiors to arrive at a total budget. You may want to keep a small amount as a surplus for any last-minute surprises. Take some once done to decide on taking up this challenge.
Home loan v/s your age:
Like every other financial investment, it is wiser to invest in a house at a younger age when going in for a bank loan. Banks evaluate your loan application depending upon your earning years. The younger you are, the higher the tenure of the loan and the smaller the EMIs. While you can take a loan later, you have to be prepared to have a shorter tenure and bigger EMIs.
Doesn’t it? Though one might think, ‘I’m not going to sell it,’ but still. Like any other investment, you would want this to appreciate as well, given the amount of time and energy that goes into buying one. It’s good to understand the current and potential future development of the locality you are considering. The higher the development and growth of infrastructure, the better the value of your home as time goes by!
Proximity to markets, workspaces, educational institutions, bus, and railway stations helps keep monthly transportation costs low.
It is the amount you pay as a part of buying a home, usually not less than 20%, while a bank loan finances the rest. As a part of your budgeting exercise, you can work out a higher down payment to keep the loan smaller and lower the EMIs. It also helps save a lot on interest payments. As explained before, if you avail of the loan at an older age, you will have to pay a higher down payment as given the bank norms, you will not be able to secure a bigger loan or a longer repayment tenure.
Bank approved project:
Buying a home is a huge decision that requires a considerable percentage of your savings and income. So it is essential to look for properties that banks approve for a home loan. You can always contact your bank’s home loan department to try and get a list of pre-approved properties in your city. This mitigates the risk of losing your money through wrong investments.
The Bottom Line:
Before you can think about purchasing your dream home, you need to look up to ensure that your finances are in order, you’ve thought through, and you are prepared to take up the significant financial stress over a long time.
Since buying a home is one of the most significant financial decisions you’ll make, it shouldn’t be taken lightly. While the points would help, we sincerely suggest connecting with a financial planner or a bank manager to try and understand all aspects of buying a home. Consulting your family, close friends, and colleagues who might have recently made a purchase will also help.