Buying a home is perhaps the most important financial decision and goal in life. Since the last decade or so, easy availability of home loans and more options to buy from are ensuring that this sector is witnessing tremendously growth. However, before you decide on that dream home, do consider the following:
Deciding on the real reason to buy a home along with the location of the home are the most important considerations to be kept in mind. While a home in a prime location will cost you more, the benefits of having everything within reach along with a higher rent option are tempting. However, non-prime locations may increase commuting costs, overall maintenance and could fetch lower rents.
Just like any other loan, a home loan too has a principal and interest component. As a general practice, the interest amount is paid off first before one starts repaying the principal amount. Being aware of your exact interest and principle amount will tell you what you actually pay for your dream home.
Typically, home loans take care of 85% of the cost of the property while the balance 15% has to be borne by the borrower. This 85% constitutes the EMI amount that you pay month-on-month. Ensure that total loan EMIs do not exceed 40% of your take home salary.
While too much debt is never a healthy way to live, foreclosing any loan after a long period does not have a visible benefit. This is because you would have already paid off the interest part without touching a little part of the principal amount. So, if you hold some surplus, keep an eye on reducing your debt burden
There are tax benefits to be availed on repayment of home loans. And this will add to your take home pay, which may be added to your saving surplus.
Since a majority considers just the EMIs to be paid as their affordability factor, one must also ensure that other important financial goals may be impacted by this decision. So use a professional financial planners advice to make sure that you are indeed buying a home of your dreams.
