When you start working in the direction of owning your dream home, you will be advised by a number of people about how to manage your finances. Easy availability of home loan has made it possible for a middle class individual to buy his own home. Recently, the government has also set the LTV ratio at 90% for properties below 30 lakh to support affordability. Although a major part of your home’s value can be funded through loan, you still have to arrange the down payment on your own. It takes a calculated planning in advance to avoid any regrets related to your property purchase later on.
First of all, you must decide on the percentage of your property’s value that needs to be funded through loan. Though the banks are ready to fund as much as is allowed by the RBI, it is important on your part to know how much EMI you can afford in a month and how long do you wish to keep the tenure. This largely depends on your take home salary. For example, if your monthly salary is 1,25,000 and your expenses are 55,000, your surplus income will be 70,000. So now if you wish to buy a home worth 85 Lakh, you can easily pay 45% of your take home salary as EMI. So, you can get a loan of 52 lakhs for 15 years at 10% interest rate.
Now, the rest 33 lakhs is to be paid as down payment. Now if you have enough savings and investments to arrange for the down payment, it will be quite easy for you. But in a different scenario, where you do not have much savings, you might want to fund a higher amount through loan which will result in a higher EMI. You will have to adjust your other expenses and bring a few changes in your lifestyle to afford the same.
It is, therefore, advised to invest your money in other investment ventures like Fixed Deposits, Mutual Funds and savings account. It is very crucial to watch your budget at least 2 years before investing in property. Invest in a venture that is liquid enough to arrange funds at such time. Equities would not be a good idea as the market situation might not be supportive when you need the funds. Short term investment is a risky affair and you need to be very cautious about it. Gold can also fetch you good value but you must be sentimentally ready to do away with a golden asset for the down payment.
Another way to arrange for down payment is to borrow from friends and relatives. You can get a substantial amount from them at low or no interest rate and you can also get a longer time to payback. Buying a house is a major financial decision but at the same time an emotional decision too. Hence, it becomes important to make sure that you don’t shell out all your savings on property purchase. Keep yourself covered for adverse situations and then make a move towards your dream home.
Read More About…….Tips to be Financially Ready to Buy Your First Home