House : Which is an important dream of every individual living in this planet. This post is about how to plan your finances and get yourself prepared for buying a house. House – can be a flat in an apartment or an individual house.
Before that why should we buy a house?
1) gives a sense of pride in ownership
2) best and only family asset for family and future generations.
3) tax deductions
4) appreciating asset
When and how to buy a house?
– You need to plan at least 3 years in advance, before you buy a house.
– Buying a house, needs huge capital investment, which you can mobilize from your savings, from friends, family & majorly through bank loans.
There are two components in funding,
1) Down payment
2) Bank loan
Down payment-
For paying a down payment, you need to start saving at least for 3 years based on your budget. Most banks ask you to pay 10- 20% of the total value of the property. But the thumb rule is, its better pay 50% of the property value as down payment and enjoy a peaceful life. Off course there is no upper limit. The more the down payment, the lesser the EMI and you can close the loan quickly and go for a second one.
Bank Loan –
So, now once you are ready with budget and necessary down payment, go hunting for a good banking institution, who really cares for their customer. LIC, HDFC, SBI are few of them who pass benefit to the customer immediately if there is a rate cut by RBI. Look for small sized banks too and build a good relationship with them, this will help in future. On EMI, Pay EMI less, try to live with the present life style. Look for paying more EMI, if it’s affordable for you, some banks allow you to pay lesser emi for the first few years, then higher EMI in later part. Don’t choose that, they will always keep you debted.
On What budget should i buy a house?
Calculate your family expense, put a monthly budget and find how much you can save every month. The savings + the rent which you pay presently will help you arrive at a budget. This is the best way. Do not get lured by or get carried away by the facilities builder or promoter offer. These are immaterial. Club house, jogging track, swimming pool, tennis court does not matter.
What is the point of buying a house near a popular non-veg hotel, when you don’t eat non-veg?
So buy a house, within your budget. Aspiration is different! Buying a home in boat club is aspiration, owning a home is essential, based on your affordability.
Hoping this post, will give you clarity.
-Raja
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