Buying a house for the first time might bring excitement and also, a whole lot of nervousness. We are breaking down everything for you here.
The Dream House
BW Businessworld mentioned a study conducted by NoBroker, a tech-based brokerage-free real estate platform, on over 21,000 customers and its own database, showed that real estate is the preferred investment choice across regions in India. The ‘India Real Estate Report 2021’ released in January 2022 showed that 76% of Indians choose property as their most popular investment option. The survey found that 43% of its respondents are looking to purchase another property for investment purposes in 2022. 84% of respondents believe that right now is the best time to buy a property for end use.
We have all been spending a lot of our time inside our houses ever since the pandemic began. Almost all of the companies have asked their employees to work from home, while most of the employees have begun to offer remote opportunities due to the flexibility it offers to the employees. Buying a house might have been our dream even before the pandemic but the new dynamic of working from home has illustrated the importance of having your own comfortable place.
So, here are a couple of tips to help you financially prepare for a new house. This blog comes with the Koshex promise (i.e.) there will be no jargon used here and everything will be explained in an easy-to-understand manner.
Saving For The Down Payment
Financial discipline is the most important thing you have to have to make this dream come true. You will need to save for your down payment. Your down payment requirement will depend on the type of mortgage you choose and the bank. The down payment will be anywhere between 10% and 25% of the property’s market value.
For example, if a 2BHK apartment costs about ₹60 lakhs, the down payment will be between ₹6 lakhs and ₹15 lakhs. In order to build your down payment fund, you have to avoid unnecessary expenses, pay off your debt, and save diligently.
Boost Your Credit
Your credit score will determine how much loan you could get from the lender and it will also affect the interest rate offered by the lender. You can get free copies of your credit report to check your credit score. Please read our blog about credit scores to learn more about how they work. Try paying your bills on time and keep your credit card balances as low as possible. Don’t try to close your old credit cards, as it may negatively affect your credit score.
Have you sorted out the details of what your dream home will look like? Are you looking to buy an apartment, an independent house, or a condo? Where are you trying to find a house – within the city or on the outskirts? Also, what kind of amenities are you expecting in the house? Are you willing to pay for car parking, a swimming pool, clubhouse? It is better to decide on a budget and find a home that comes within that. You should also write down how much you can afford to pay every month in EMIs so that you don’t struggle later.
Apart from the down payment, you would require money for other expenses such as stamp duty, registration fees, memorandum of title deed charges, furnishing costs, electricity connection, water supply, and so on. This might at least cost anywhere between ₹3-₹5 lakhs or even more. So, you have to be financially prepared for these expenses as well. Try to have an estimate and start saving accordingly in order to avoid being overwhelmed at the last minute.
Go Beyond Saving
If you need to save ₹10 lakhs for your down payment, simply setting aside a small portion of your salary every month will not do the trick. You will have to put them in certain investment instruments in order to be able to save the target amount quickly. If you are used to putting your money in a bank savings account, consider allocating some portion of your salary to a bank’s Recurring Deposit, as it will earn more interest.
You can also choose mutual funds, which might garner you an average of 10-15% interest per annum, as compared to a bank RD, which will only fetch you an average interest rate of 7-8%. Even though there is nothing wrong with putting your money in the RD, you can put some portion in Mutual Funds to diversify your portfolio and earn more returns.
More In The Next Blog…
In this blog, we spoke about how you can prepare yourself before buying a house. In our next blog, we will be discussing the factors that you have to consider while buying a home. You can also tell us in the comments whether your favorite investment choice is real estate or other options like mutual funds, digital gold, smart deposits, insurance, stocks, or others.