Buying a home is more than just a major financial decision. It carries great emotional weight, too. That’s why buying a house needs both a fair amount of planning as well as rational decision-making. Needless to say, one needs to plan for the upcoming debt, too, that comes with buying a house.
In the last two years, homebuying has become a bit tough because of the uncertainties surrounding the Covid pandemic. People were unwilling to spend that kind of huge money on buying homes because of the prevailing uncertainties. But now, with the economy opening up, people are slowly getting back to their routine. Consequently, there has been an increasing demand for residential properties and greater availability of loans, too.
Now, with banks simultaneously increasing the rate of interest on home and personal loans, while also offering discounts on loan rates and otherwise, you might be asking yourself whether it is the right time to invest in a home. The answer would depend a lot on your current financial situation, and future needs.
Explains Arijit Sen, a Sebi-registered investment advisor and co-founder of Merry Mind, a Kolkata-based financial advisory firm: “I often get to hear from my clients that they have bought a residential property. They are paying the equated monthly instalments (EMIs), too. But, money management is becoming a challenge. They are not left with any surplus money at the month-end. Living paycheque to paycheque, and often with budget deficit is becoming stressful.”
So, to avoid feeling overwhelmed after buying a home on the back of a home loan, ideally one needs to understand beforehand how to effectively plan for a home loan.
So, here are seven questions you should ask yourself to see whether you are ready to buy a home now:
Need: What is the need for buying a property? If it’s for residential purposes, do I plan to settle in that particular city? If there’s a possibility to shift to a different city shortly, will rental accommodation make sense? If it’s for investment purposes, what is my overall asset allocation picture looking like? How do I plan to utilise this asset?
Downpayment: How do I make provision for a downpayment? Will it impact my other financial commitments?
EMI: What is the EMI I am required to pay? Do I have the capability to pay the EMIs now and also in the future? What portion of my income is going towards EMIs?
Co-Borrow With Your Spouse: What would the scenario look like if co-borrow with my spouse?
Home Loan Insurance: What kind of home loan assurance policy do I need to take?
Plan B (Emergency Plan): What’s my emergency plan? In case, I fall ill and/or meet with an accident, and/or lose my income, or my income fluctuates, how will I pay my EMI? In case, there’s a situation where I need to pre-close the loan, how will I proceed?
Stamp Duty Reduction By Local Governments: What are the additional benefits I am eligible for?
In the end, it’s only you who would know whether to invest in a home now or later. By having more clarity of thought and putting your finances in order, you could make that decision more clearly and take the plunge to finally buy your dream home.
