‘Home’ is a ‘feeling’!
Its also precious when we share the space with our loved ones under one roof which we ‘own’!
To buy a house is a dream of many.
There are many thumb rules, suggestions given, theories applied when someone wishes to buy a house..
Well, all of them may not be suitable for you when it comes to buying your own space.
Why?
Simply because, each one differs in terms of income, future goals, risk appetite, aspirations regarding buying a house, risk appetite.
But, still, many people wish to chase this dream. So, lets understand five essential things that can help you make ready to purchase your ‘dream home’.
Make your ‘why’ clear before buying a house property:
Generally, they say, when you start earning, a good job, own house & family should be your priority!
Well, the other two, one can look for & achieve, buying own house is an expensive!
I have seen many people who buy a house property just because-
- They wish to get more tax rebate
- They wish to have a ‘ownership title’ of one property
- They think that earlier I purchase the property, better it is to pay off the housing loan before retirement.
Well, the reasons can be any of the above, it never reduces the burden of cost from your shoulders.
If you have a proper reason like-
- You have moved to a city where you wish to settle,
- You & family do not possess any house so far under ownership or have it with lesser space
- You will use it for your own residence
Then only, you should think of purchasing one.
Please remember, when your ‘why’ is clear & thoughtful, then it makes sense to buy a house property.
Buying just another house to show off to society or to add one more ‘tangible’ asset in your portfolio, please think twice before purchasing a house.
Ready to bear the EMI payments for a longer period of time:
A house, a simple 1 BHK costs around 60 lakhs-75 lakhs in metro cities today. Rates differ area-wise.
To accumulate this much money, one need to spend lifetime earning it.
‘Housing loan’ is a solution which comes naturally when one goes for house purchase.
To be eligible for purchasing a house, one should –
- Earn income enough that banks find the person eligible to give a loan. Income range for a salaried person, a professional & a businessman differ as per bank’s minimum required income eligibility standards
- Have a good credit score at the time of application. Credit score is the measurement to check one’s ability to pay off the loan liabilities on time as per the terms set
- File income tax returns regularly.
- Can pay the amount of ‘down payment’ for a housing loan.
Depending on the above factors in addition to the cost of house, a bank approves the housing loan.
Loan tenure comes from 10 years to 30 years. Longer the tenure, EMIs can be ore affordable but a liability lasts longer in life.
It does mean that, how much ever you earn, a fixed portion of your income will go towards loan EMI for a longer duration.
There is an option to prepay your housing loan during the loan tenure, but then you have your other expenses, investments to look after. Which means you need to balance your expenses, investments & loan EMIs for a longer period.
Check your readiness for all the above facts.
Stability of your income streams:
Once someone said jokingly, “you will start loving your job the day you get a housing loan’!
Its true because, many of us today fall in private sector jobs or self-employment where stability of income is lesser.
When income is not stable, it leads to ‘insecurity’.
One changes one job to another in order to get more income & better job titles. Self employed people like professionals, businessmen also strive constantly to get better with their income streams.
But, when you apply for a housing loan, you are entitled to pay loan EMIs. At the given day of the month, you need to honor your commitment.
Let me share with you a true story..
one of my neighbors was earning a good salary at private sector job. He thought to buy one house & applied for a housing loan. While applying, he was eligible as per bank’s conditions to get a loan so he got it.
Within 1 year of applying for a loan & buying a house, company where he was working started making losses. He, being the one on a third-party payroll, was among the first lot to be sacked.
He, his wife & newly born child suffered due to this. Some-how he managed to get new job, though with a lesser salary, but could continue with loan EMI payments.
Lesson? You should judge how much stable your income streams are while applying for a housing loan. If you & spouse, both are working, then at least one should have better income stability.
It will surely give a ‘peace of mind’& you can pay off your EMI regularly.
Have your emergency fund ready:
As the name suggests, emergency fund comes to our rescue to pay off our expenses like loan EMIs, household expenses, children school fees etc when our income streams are disturbed suddenly.
If you are working in private sector, you may face a job-loss or salary cut, a professional or a business person can face losses in the business or a profession.
In such cases, emergency fund saves us!
In the example I shared the above, the person didn’t have emergency fund to take care of his expenses & so needed to borrow & redeem some investments that time.
Housing loan or a property purchase is costly affair. Emergency fund, is a must have.
Apply for term & health insurance:
‘insurance’ does what a ‘fencing does to our house property’.. it protects us & our loved ones.
For a person, who is going to get a liability like housing loan, should must have a right & suitable life insurance’ i.e. ‘TERM INSURANCE’!
Term insurance simply works like this-
A person opts for a sum assured for a certain ‘term’ i.e. no of years. Applicable amount of premium he/she can pay monthly, half yearly, annually till the end of the term. If during the term, unfortunately, insured person dies, then the nominee of the policy gets the sum assured back. But, if the insured person survives the term, then he/she gets nothing in return.
This way, the term insurance actually serves the purpose behind taking a life insurance.
There are methods & calculations to determine amount of sum assured ‘actually required’ for a person. Your financial planner can help you plan for the same.
But, if going by a thumb rule, then you should have at least 10 times of your annual income as the amount of sum assured for term insurance policy.
Another important type of insurance is, health insurance!
We all know how much costly all the medical treatments have become today. Especially, during Covind-19 pick time, we all have experienced this.
We have heard the stories, some have actually experienced it as how some of our relatives, neighbors, friends have paid hospital bills of lakhs of rupees for a treatment.
Though painful, the covid 19 was a trigger point for majority of people to opt for a health insurance.
Health insurance helps to reduce the burden of costs on our shoulders due to medical treatments, hospitalization.
After the pandemic, terms & conditions related to health insurance have been evolved.
You should apply for a family floater plan while applying for a health insurance.
Before applying check, the below-
- Current medical conditions & health history of family members
- List of network hospitals in the city you live in
- There should not be any cap on room rent, no co-pay involved
- Waiting period for existing deceases should not be longer than 2- 3years
- Check for exclusions i.e. illnesses/deceases which are not covered under the policy
- Claim settlement process, point of contacts, necessary documents to apply for the claim.
Read & understand the terms & conditions before applying for a health insurance policy.
Even if you & spouse are covered under ‘group medical cover’ from your respective employers, you should have our own personal health cover.
A house a ‘feeling’, A sense of accomplishment & a matter of pride when we show it to others! But taking into account, volatility & non transparency in real estate prices, fluctuation in interest rates, uncertainty in jobs & profession, one should be thoughtful before buying a house!