5 Things to Keep in Mind if You Are Planning to Purchase a Home

Updated on: 17 Jan 2024 // 4 min read // Home Loans
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When you set out to buy a home, you feel excited, overwhelmed and frightened. While you will have a place to call your own, you will also need to ensure you meet your monthly financial obligation without fail. If you don’t keep up with your Home Loan repayment, you could end up losing your home. That is the reason you need to prepare yourself for home purchase and ownership.

Here are a few things that you should check before you start looking for Housing Loan Deals to purchase your home:

1. Pay Off Your Debt

Buying a home is not as straightforward as opening your wallet and taking out cash to pay for it. You will need a loan, and the last thing you require is additional debt that stresses you out and adds to your financial woes.

Hence, it is prudent you address your liabilities before you decide to put in a request for a Home Loan, clear your debt. These debts could be in the form of a car loan, large Credit Card payments, or Personal Loan. The idea is to ensure you have more liquidity to pay the monthly EMIs without getting worked up.

Remember, repaying debt requires patience and discipline. It may feel like a never-ending process, but you will be grateful you took this measure. It will ensure you are better equipped to manage the financial responsibilities that come with homeownership.

2. Create a Contingency Fund

Every individual should have an emergency fund to fall back for contingencies. The fund becomes more important as a homeowner, as you may need to carry out repairs or even major renovation. If you are unprepared for emergencies related to your home, you will have two alternatives. You can get further in debt, or you can ignore the requirements of your home and let it fall into a state of disrepair. The choice is yours.

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Make sure your emergency fund has sufficient money to undertake major repairs, like roof repair, floor re-tiling, bathroom re-fitting and changing the complete wiring or plumbing in your new home. Having such a fund will not only keep you protected, but it will also ensure peace of mind.

3. Have Your Down Payment Ready

The more down payment you pay for your home, the lower will be the amount you will have to borrow from the bank. Usually, you cannot get a bank or non-banking finance company to finance 100% of your Home Loan. Usually, lenders give a maximum of 80% of the amount, depending on your income and liabilities.

So, saving up for the down payment makes sense. However, you shouldn’t aim just for the 20%. Instead, you should build equity from the moment you get ownership of your home, and this is possible by making a substantial down payment with your own funds. Setting down a significant amount of money on your new home also creates a favourable impression of you in the eyes of the lender. They will be more conducive to giving you attractive interest rate.

4. Take into Account the Actual Cost of Home Ownership

It is prudent to remember that just making EMI (Equated Monthly Instalment) payments is not the sole cost of home ownership. Once you finalise the deal for the house, there are many expenses that you will incur, including stamp duty and registration costs, GST, house tax and many other ancillary costs that make home ownership expensive.

You need to take into account these costs and ensure you are prepared for them. Also, set aside funds for moving, furnishing and carrying out minor repairs so that your home is just as you envisaged. Also, once you shift in, there will be routine maintenance and repairs, and society dues if you are living in a colony. It is a good idea to take home insurance so that your asset is safe.

5. Budget for the Monthly EMIs

When you are calculating the EMIs for your Home Loan, you will think it is affordable. However, the reality may be different if unexpected costs come into play. So, always conduct a test run by making the EMI part of your monthly budget. Do this for around three to four months to see how you manage your expenses each month. In case you do not get financially distressed, it is alright to opt for a Home Loan.

In case you find it difficult, reduce the loan amount and once again follow the same procedure for another couple of months to see how you manage. This will give you an idea of the loan amount and the kind of homes you should narrow your search to.

Buying a home is a significant financial commitment, and you should be prepared for all eventualities, should they arise. Also, make it a point to compare different lenders and find one that offers attractive interest rate and terms and conditions. You can get in touch with the financial experts at MyMoneyMantra. They will help narrow down your search for the perfect lenders, so that you get competitive housing loan deals that will help you purchase your dream home without any hassle.

Also Read: Is It Possible to Claim a Tax Deduction on Home Loan and HRA Both?

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