Buying home is a dream for Indians. Owning a house considered as a social status or as investment in India. But buying home without considering important factors would impact your financial position and personal finance heavily. Recent times bank gives maximum 85% to 90% of home property value as loan. Don’t fall into financial trap by taking home loan. In this post, we will discuss what factors to be considered before taking home loan and how much EMI can be affordable by you for home loan.
Select the property in well connected area and scope for growth. You can validate by checking rent in nearby areas. In case there are many homes available for rent and no occupancy, re validate your decision. Check for availability of water, nearby companies, tech parks, schools and demand in that area.
If you are planning to buy home for your stay and not as investment, first check the approximate rent of the home. If home is worth for 20,000 rupees rent, EMI should not be more than 40,000. Maximum the EMI should be 1.5 times to 2.0 times of rent value.
Maximum EMI should be 1.5 to 2.0 of monthly rent of the home.
Do not take 80% as loan to buy home and loan tenure to 20 years. Do not do the mistake. Save money as much as possible before buy a home. Save 30 to 50% money before buy a property. It would greatly save on total interest for the home loan.
Avail maximum 70% as loan to buy a home and loan tenure should not be more than 15 years.
All the loan EMI’s should be less than 40% of your monthly income. It includes your home loan, personal loan and vehicle loan. If your monthly income is 1,00,000 rupees, your EMI should be 40,000 maximum for all the loans. If you have existing car loan or personal loan, wait for loan closure and plan for home loan. Make the investment as part of your financial plan. Invest at least 20% in mutual fund SIP or investment in stocks or gold to create wealth in long term.
Maximum 40% loan EMI, 15% investment, 5% for insurance and 5% for emergency fund
Get interest rate from different banks like SBi, ICICI , HDFC and other loan institutions. Interest rate should be less than 8.5% for home loan.
Do not take personal loan for initial home loan payment. It is dangerous trap in your financial decision. Many people plan to buy home without initial amount. They pledge their gold and take out all their investment money or take personal loan to pay the initial payment. It all would heavily impact your financial planning. There are enough properties available in the market and you would get your dream home whenever you begin your search. Don’t take decision in hurry.
No personal loan for initial payment.
In case you are staying for rent, look for pre-launch offers with good offers. Plan based on project completion date and your expected occupancy date. Select reputed builder in case you are going for pre-launch offers.
For better price and planning, select reputed builders pre-launch offers
Validate the property worth value by comparing the rent value of the home. The property maximum value would be 300X of rent value. If home property rent is 25,000, the property maximum value would be 75 lakhs. If it beyond 300x value, you are paying overprice for the property. Buying property with 200X value would be better and nominal price for the property. Home rent 30k value and property value is 60lakhs, it would be best price for the buyer.
Property value should not be more than 300X of rent value.
Consider all the factors before buy a home. Buying home should not disturb your investment plan. Let mutual fund SIP continue with home loan EMI. In an EMI you pay interest and in an SIP you earn interest. It is as simple as that but simple isn’t easy. If you plan that holiday earlier, you will start saving for it and earn an interest on your savings by
investing in an SIP in a liquid or even an ultra-short fund for your short-term goals. You also get the time to do enough research, decide on the best time to visit the place, and get a good deal on tickets