5 Things to Consider if You Are Planning to Buy a Luxury Home

Buying your own home is one of the most significant achievements for an individual, for which we are willing to invest all our savings also. You spend years planning about buying your own home and consider a large number of factors against which you assess each property to ensure that you only get the best for you. When it comes to buying a home for living yourself, you might not hesitate to go the extra mile and buy a luxury home with all world-class amenities and facilities. But as the name is self-explanatory, Luxury Homes have all the amenities that you can dream of, but it will come at a price.

Anyways, the prices of real estate properties across India have increased considerably over the last few years and on top of that your desire to purchase a luxury home might push your finances and at some point, you might start to question your decision. There is no need to think about it, you worked so hard all your life to be able to realise this dream, so you simply deserve the best. You need not do anything else, just check your Home Loan eligibility and apply for a Home Loan.

Why Do I Need a Home Loan?

Getting a Home Loan is more of a necessity than a luxury in case you want to buy a luxury home in a posh neighborhood. As the prices of residential properties have been witnessing an upward trend since last many years, it has become virtually impossible to buy a home on an outright purchase. In such a situation Home Loans offer you the best option to realise your dreams. Even if you have adequate money, getting a Home Loan makes a lot of sense as compared to an outright purchase due to the reasons mentioned below:

• The interest on Home Loans is one of the lowest in the market and starts at40% (as per prevailing market conditions).
• The interest paid on Home Loan is eligible for deduction under income tax laws.
• There are various incentives and concessions available for First-Time Buyer Home Loans.
• When you opt for a Home Loan, you only need to arrange the margin money,and rest of the amount is payable in EMIs (Equated Monthly Instalments). This does not put any pressure on your finances.
• You can use the money for some other constructive purpose also.

Factors to Consider While Buying a Luxury Home

If you are planning to buy a luxury home with the help of a Home Loan, you must consider the following factors before making a decision:

1. Credit Score

Before you even consider buying a luxury home, which is a significant financial decision, you must check your credit score. Your credit score is rated out of 900 by credit bureaus and is one of the most crucialfactors that decide your Home Loan eligibility.Your credit score should ideally be above 650 in order to get the best interest rates on your housing loan. If you have a poor credit score, you should instead work on improving your credit score.

2. Margin Money

Usually, all financial institutions approve 75% of the value as a Home Loan if the total value of the property is above 75 Lakhs. For loans between the range of 30 Lakhs to 75 lakhs the LTV (Loan-to-Value) Ratio is 80% and for loans of below 30 Lakhs, the LTV set by the Reserve Bank of India is 90%. Rest of the amount is to be arranged by the borrower. If you are also buying a luxury home with total value above 77 Lakhs, then you must ensure that you have adequate margin money with you. Otherwise, the loan application will not be approved by the lender. You must ensure the availability of the margin money before moving an application for Home Loan.

3. EMI Repayment Capacity

Home Loans are secured loans where your new property is hypothecated with the bank,and you are required to repay the EMIs on time in order to continue enjoying peaceful possession of the property. Before you decide to take a Home Loan, you must assess your repayment capacity and opt for only that much amount which you can afford to repay on a timely basis. Even if it means paying more contribution towards the margin money. Defaulting on EMIs will impact your credit score negatively.

4. Interest Rates

You must understand that even a slight reduction in the interest rates can materialise into significant savings in the long run if the amount borrowed is considerably high. So, you must do necessary research around and identify the lenders with the lowest interest rates. Do not rush into taking a decision, take your time and make sure that you get the best deal.

5. Other Charges

You need to pay attention to other factors in addition to the interest rates. You need to ensure that various other expenses such as processing fees, pre-payment charges, late payment charges, and others are not against your benefit. Sometimes, all these costs add up to a significant amount and might affect your finances considerably. You must do the necessary research and ensure that your interests are safeguarded.

Considering these factors is essential for you to before you get a home loan to buy your luxury home. It is a significant decision and requires you to consider all relevant factors to make sure that your dream home does not turn into a nightmare for you.