The decision of home buying traps most borrowers under financial constraints. It is very important to go through every checklist so that things don’t go beyond your affordability. While loans can be available easily for fulfilling your lifetime dreams, you must also remember that these are long-term financial burdens that you have to render for more than 15 years.
When you plan to buy a home with the support of bank loans, considering various aspects is important to avoid any mishap. Take a deep dive into the blog to point out vital things that might help you select the most strategic decision regarding home shopping.
Keep the Emergency Fund Ready
Before computing the large numerical figures, make sure you have enough funds. Financial advisors always suggest building a strong financial foundation so that you don't have to worry about any unprecedented emergencies in the coming days. Since home-buying is a big commitment, maintaining a financial buffer can give your family full coverage in medical or other emergencies.
The emergency capital should be fairly high to meet all your financial obligation for the next year. Possibilities are there that this corpus can give you enough support in the EMI payment of your new home loan. This contingency fund is inevitable for immediate financing of income losses caused by accident, joblessness, or chronic illness.
Think About The Substantial Down Payment
Banks agree to provide you 80% of the property value, while the rest, 20%, is the borrower's responsibility. Before taking the huge loan, make sure you have enough liquid money to spend on the down payment, GST, stamp duty, interior decoration, and other accumulated services. You can go for a higher down payment to minimize the EMI burden.
This will also allow you to repay the loan faster and get the home loan at a much lower interest rate. Before you employ your savings on the down payment, it is essential to think of other critical life goals. These savings act as the biggest resort without squeezing on your liquid assets to renovate the home or support financial hardships. Therefore, plan respectively.
Consider Your Financial Strength on EMI Payment
Along with considering the loan amount, you must budget the Equated Monthly Installment (EMI) properly. Banks often agree to give you a loan at 40% EMI on meeting specific criteria. However, there might be a situation when you have to live on the breadline to repay your EMI every month. It would be best to consider various associated expenses while budgeting your loan.
Never go overboard to stretch your budget limitlessly. When you decide to get home loans, you must make up your mind that EMI is the hard reality of your life now. Once your loan is sanctioned, your money will automatically flow out from your account. This is when you should look over the comfort level that you have to bear for a lifetime. For the sake of enjoying tax benefits, never elongate the loan EMI.
Don’t Compromise on Other Life Goals
Never bring yourself into such a financial trap where you can't contribute to your other life goals. Think about your children's education or your retirement plan, and you can’t compromise to prioritize home-buying for now. Choose your life goals selectively that might cut back your present financial contribution.