It is when you finally decide to buy a house of your own, you understand the true meaning of ‘home sweet home’. The feeling of owning a house is beyond compare but it requires a great amount of meticulous planning. Even the tiniest financial decisions have an impact on the purchase. Most of the times, owing to rapidly surging property prices, buying a house requires taking a housing loan. Once the property’s location is zeroed in on, you must finalize the budget comprising of the property’s price, registration fees, stamp duty and other components.
How much loan to take?
Usually 85% of the property’s price is provided as loan by most banks, however it is imperative you consider the EMI amount before finalizing a loan. Sometimes it become difficult to make a higher down-payment, so you can decide to opt for a higher loan component. You may assume that the higher EMI would not hurt with time and expected salary hikes but in case things do not work as planned, you should be prepared. It is easier to calculate the amount of housing loan to take based on the corpus of savings you have accumulated from your investments.
How to arrange the down-payment?
Arranging the down-payment becomes very crucial in the process of taking a housing loan.
- You need to make a comprehensive list of your financial investments and resources. Most people consider breaking their liquid assets such as savings account, gold, fixed deposits and recurring deposits for making the down-payment. Recurring deposit is the safest and the steadiest way to keep the inflow constant.
- You must be careful that you do not drain out your funds at one go and keep your contingency fund aside for at least a minimum of 6 months.
- Reducing your expenses and keeping a steady flow of corpus is important to maintain the balance in your financial life. It may require some lifestyle changes and adjustments.
- When the term of the down-payment is below 3 years, best investments are ultra-short term funds, recurring deposits or liquid funds. Investing in equity funds is not a good idea as the real returns are after 2-3 years and you may not gain anything substantial for the down-payment of your housing loan.
What are your other options?
You can also arrange the down-payment from your family members if there is a dire necessity. In this case, you will have two benefits, you will not have to pay an interest on the loan and you will get an extension to pay off your housing loan. However, consider this as the last option and only if you are comfortable and close with the person you are taking loan from.
What must you always remember?
You must always be prepared for a medical emergency. Taking a housing loan can prove burdensome for some of you and you may end up depleting all your resources. It is very important to have an adequate health cover at all points of time, as you may have your dream mansion ready but if you aren’t healthy enough to enjoy the stay, there is no point.
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