THINKING OF BUYING A HOUSE? ASK YOURSELF THESE QUESTIONS BEFORE
Every year, at BankBazaar, we conduct a survey titled the ‘BankBazaar Aspiration Index’ to understand people’s key aspirations through a personal finance lens. The survey assesses the aspirations of a pan-Indian demographic across five broad segments: Wealth, Health, Relationships, Fame, and Personal Growth. Time and again, home ownership continues to be among the top three out of five aspirations that Indians cherish. Historical data and the latest insights, too, support this finding.
The process of buying a house comes with its fair share of stress. Given that it is one of the most expensive purchases one is likely to make in their lifetime, decisions around have to be taken with utmost care. There are many aspects to purchasing a house or property which you must assess before buying it. Let’s look at some crucial questions you must ask yourself before you begin shopping for your dream home.
Should you buy or rent?
It is important to decide if you want to buy a house or rent one. Weigh the pros and cons of both options before deciding to buy. Buying a house is a major financial decision which can foster a sense of accomplishment and belongingness. Check if the house you wish to buy aligns with your lifestyle and financial goals. Renting, on the other hand, offers flexibility while owning a house is a long-term commitment with its own advantages. Would you be willing to take on the responsibilities of maintaining a house or would you prefer the flexibility that renting offers?
Can you afford it?
This is a crucial question to address before buying a house. Assess your financial situation – income, savings, and debt - to determine whether it is financially viable for you to buy a house without upsetting your finances. Ensure you have a stable income source that will allow you to accommodate loan EMIs, insurance, and maintenance costs. If you are taking a home loan to buy the house, check that your credit score meets the lenders criteria. A high credit score can help get you lower rates and better terms on home loans. If your score is below the eligibility criteria, review your report and address the issues flagged to improve your score and loan eligibility.
Have you saved for a down payment?
Most lenders request for a down payment on home loans. This payment is typically up to 20% of the property’s purchase price and must be borne by the borrower. Do you have sufficient savings for a down payment, as well as additional closing costs? A recently published survey on real estate titled ‘Happy Homeowners’ highlights that finances are a crucial factor to consider when purchasing a home. If you have about the required amount to make the down payment on your loan, you may be ready to purchase the house.
Homeownership is a long-term plan. Are you willing to commit to it?
The process of buying a home, right from scouting, to making your last loan repayment, is a long one. Moreover, you should be prepared to stay in the house for at least 5-7 years for it to be financially worthwhile. Keeping this in mind, it is essential that you to consider your future plans. Do you plan to stay in the same location for the years to come? What strategy are you looking to adopt to own your dream home? Would you buy your dream home outright with the help of funding and your savings, or would you prefer starting with a smaller, more affordable house before upgrading to a bigger one?
Should you go for a ready-to-move in property or an under construction one?
The decision to choose between a ready-to-move-in property or an under construction one is dependent on many factors. The first factor is finances. Under construction properties may be more attractive cost-wise, compared to ready-to-move-in properties. But they also carry the risk of delays in completion and possession. If you are not planning to settle down in a particular city immediately, you can consider buying an under-construction property with a reputed builder. But, if you’re looking to shift soon, a ready-to-move-in property may be a wiser choice.
Are you ready to be a home-owner?
Homeownership doesn’t end with financing a house. It also includes ensuring home maintenance and repairs, filing property-related taxes, resident welfare associations, following the rules and regulations of corporations and other civic bodies, among other things. Make sure you have the financial capacity to cover all such additional costs that accompany homeownership.
The decision to own a house ultimately rests on your financial situation, goals, and preferences. These questions are a good starting point for you to assess whether you are ready to buy a house.
Adhil Shetty is the CEO of BankBazaar.com
2023-10-17T12:36:32Z dg43tfdfdgfd