6 Mins June 23, 2022
Shruti and Shreyas Yadav, both aged 26, have been married for a year. While Shruti works in an administrative role in a large Indian company, Shreyas is a production manager at a chemical plant owned by a multi-national company.
Ever since their wedding, the couple has been dreaming of buying their own home and saving for it. They, however, felt that it would be better to have some clarity on the home-buying process and consulted Shruti’s uncle, a banker. This is what he told them.
The most important part of the home-buying exercise is to fix a budget. There is no point in dreaming of buying a home that is too far out of their financial reach. Similarly, it doesn’t make sense to aim too low because, after all, you will be living there, and you need to be comfortable and happy.
Get a fix on the financing
As first-time home buyers, Shruti and Shreyas should figure out the amount they can get as a home loan. There are enough home loan eligibility calculators on the internet to give this idea. To get a higher amount as a loan, it is best if the couple applies jointly, as their income will then be clubbed together, making them eligible for a higher amount.
While researching the home loan, the couple should also figure out three critical aspects – the tenure of the loan, the EMI (Equated Monthly Instalment), and the type of loan. All three are interlinked.
The longer the loan tenure, the smaller the EMI will be, but the downside is that the total interest they will pay on the loan will be higher. On the other hand, if they opt for a shorter tenure, their monthly EMI outgo will be higher, which they will have to budget for. But in this case, they will save on interest costs over the entire loan tenure. A home loan EMI calculator can be used for this.
[Also Read: What Type of Home Loan is the Best one for You?]
Similarly, home loans come with three interest rate options – floating rate, fixed rate, and hybrid. In the floating rate home loan, the rate of interest increases or decreases depending on the interest rate scenario. The interest rate on a floating rate home loan generally tends to be lower than the interest rate charged on a fixed rate home loan. The hybrid option is where a loan starts with an adjustable-rate and then moves to a fixed rate or vice-versa.
As far as the home loan EMIs are concerned, Shruti’s uncle told the couple that they should try and ensure that the EMIs are less than 40% of their combined income. This will not only ensure that they have funds leftover for unforeseen, but the chances of their loan getting approved are higher.
If possible, the couple should get a pre-approved home loan from their bank to put them in a stronger position while negotiating with the seller.
Shruti’s uncle said that the primary rule of buying any commercial or residential property is location, location, location. This means looking at aspects like transportation, social infrastructure like gardens, schools, medical facilities as well as entertainment options.
Many housing projects now come with amenities like playgrounds, gyms, clubhouses, and swimming pools. While all this is attractive, the fact is that the home buyer is paying for it, not just upfront when she buys the property but also for maintenance later on. Shruti and Shreyas should figure out the right balance between their needs, aspirations, and the costs involved.
If they are buying a new property, the couple should focus on the real estate developer’s reputation. Rather than buy from some lesser-known developer, it always makes sense to buy from a firm with a long-established track record. It may cost a bit more, but it is worth considering issues like timely delivery and adhering to promises.
It is vital, Shruti’s uncle said, that the couple does their due diligence on the legal paperwork of the property they are buying. They can engage a lawyer for this. While the additional cost may seem wasteful, considering that buying a home is likely the couple’s most significant investment decision for years, the extra cost is a pittance. It will, however, give them a considerable sense of mental peace.
Shruti and Shreyas could apply for a home loan with Axis Bank. Axis Bank offers a range of home loans with affordable interest rates tailored to meet the needs of all types of borrowers. Visit us to know more about home loan eligibility and home loan interest rates.
Disclaimer: The Source, a content creation and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision. Names mentioned in this article are fictitious in nature and only for explanatory purposes.