India is primarily a young nation, with as much as 50% of its population under the age of 25, and as high as 60% of its population under the age of 35. When countries like China and Japan are being forced into a quickly ageing population with 37 and 48 years is the median age, India is enjoying a boost in economic power and purchasing capacity like never before. As a result, the median age of home buyers has reduced drastically, now falling into the bracket of 25 to 35, as opposed to the earlier range of 40 to 50 years.
While the popular premonition is that millennial are inclined towards renting a home to avert the responsibilities that come along with buying one, the truth is that almost two-thirds of the millennials are more interested in investing in residential property than shelling out hefty rents month after month. And why not? After all, banks and housing finance corporations have made it exceptionally convenient for one and all to procure Home Loans at attractive interest rates and fair repayment terms.
If you too happen to be under the age of 35, waiting to jump on the Home Lan train, here’s how you can prepare yourself for doing so.
Right from deciding on which city you wish to buy your house in, to the area and locality, make sure you have it all panned out. Next, depending on your taste, preference and financial prowess, decide on whether you wish to buy a plot of land, a ready bungalow or a flat in a gated or non-gated community.
Now that you know the location and the type of property you wish to buy arrive at an estimated amount that you want to invest. While doing so, remember to aspire within your means, and steer clear from anything too outlandish when compared to your spending capacity.
When arriving at an estimate, take note of the fact that you will be required to pay 20% of the price of the property as down payment, and you will only be able to obtain the remaining 80% as the loan. Here, it is crucial to understand that even an increase of 5 Lakhs in your initial down payment, can delay your Home Loan Process for as long as a year or even more. Besides, the higher your down payment, the more will be the tie required to accumulate it, and the more significant will be the impact of inflation. Hence, a down payment worth 20 Lakhs today, may cost you upwards of 25 Lakhs for 5 years down the line.
While it may seem daunting to pay anything more than the mandatory 20% as the down payment, the fact is, the higher you pay upfront, the lower will be the loan amount. Not only will it save you from the enormous financial commitment that a bigger loan entails, but will also help you save lakhs of rupees which would otherwise go towards the interest on the loan.
Home Loan is a substantial commitment which often lasts anywhere between 10-30 years; hence, you shouldn’t take a hasty decision with respect to choosing your lender. If need be, get in touch with 3-4 or even more banks, and analyse their loan offers. While the rate of interest is one of the most crucial factors in a loan offer, don’t neglect additional charges such as legal fee, administrative fee, processing fee, valuation fee, prepayment penalty, and foreclosure charges, before making the final call.
To begin with, you should take a loan with considerably long tenure, preferably 15 years or above. This would ensure that the amount per equated monthly instalment(EMI) remains low, thus helping you manage the payment efficiently in the first few years. However, once your income rises, and you enjoy increased job stability, you must start preparing for the prepayment of the loan.
You can either do so by paying off a few lakhs every year, in addition to your EMI; or by paying the remaining sum in a single go. Not only will this help you save your hard-earned money which was going towards your interest, but will also mean that you will be the proud owner of your house, sooner than you anticipated!
Now if that doesn’t sound genuinely exhilarating, we don’t know what will!
We hope that you now have some of the most sought after tips regarding the purchase of a home. However, considering that this will be your first significant loan, we recommend you seek the assistance of an expert on this subject. You can look up to your bank or your online lender for suggesting you someone dependable in this regard!
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