When you plan to purchase your dream home, taking a home loan automatically becomes an important decision. Factors like size of the property, area, city, pricing etc are weighed by the person. However the decision of taking a home loan should be taken only after answering 4 main questions;
Will purchasing this property postpone your goals?
For purchasing a house, you need money from all your resources. You can club your savings, income, investments etc to buy your dream home. Doing this opens the possibility of delaying your current and future goals. You also need to actively plan for your retirement and balance your home loan in order to ensure you have a stress free time in old age. Hence a lot of planning and balance is needed here.
Is renting the house a better solution?
In a city like Mumbai, property rates increase rapidly Y-O-Y. Hence renting can be a better option. To know what’s best, calculate rent you will pay and set an average hike each year for a planned tenure. This can help in understanding what’s best for you; buying or renting.
Are you aware of all the property costs?
Advertised price of the property is not always the final price. There are many charges which are hidden when advertised. These come to light when you meet with builder of the property. Stamp duty, registration and legal costs push up your property’s buying price by minimum 10%. Hence, factor in these costs so you can understand if the property falls into your budget.
Is the Home Loan EMI affordable?
We have kept this as the last question on purpose. After answering the above questions, check if the EMI is affordable for you. On an average, debt must not be more than 35-40% of your income. This ensures you can manage debt and expenses along. Hence if your home loan and other debts don’t jump the barrier of 40%, it is wise to take the home loan.
A lot goes into thinking regarding a house purchase. It’s not only just the area and the price of the property but also the affordability, extra costs and retirement that matter before taking such a decision.
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