Buying a home for one’s family is considered one of the four stages of life in Hinduism. In recent years, factors like the ending of India’s economic isolation and the consequent software and technology boom has given rise to extraordinary numbers of young people beginning their investment journey early. Usually, we do not advocate buying a property in your late 20s – we would rather that you accumulate your savings so that your loan repayment amount is comparatively less when you apply for a home loan.
< 30 years of age
Some rules to remember:
- An important rule – Ensure enough funds to cover monthly household expenses, including other investments and EMIs. Offer yourself some breathing space in case of any disruption in flow of income.
- Make careful consideration while calculating loan amount. Key is to maintain healthy savings. Ensure your monthly EMI does not exceed over 30% of your monthly income.
- Don’t be in a hurry to prepay your home loan.
- Ensure your family does not lose the property in case of unforeseen circumstances. If you are single at the time of purchasing property, buy life insurance worth 1.25 times your home loan. Raise that to twice the worth of your home loan, if married.
30-35 years of age
Experts contend the right bracket for buying a home is between 30-35 years of age. At this point in life, people experience a steady rise in income and so, have secure finances which empower them to afford 30-40% of down payment easily. They are able to pay EMIs either on their own or jointly with spouses. Keep in mind, there are certain benefits to jointly owning property with spouses, like getting a good deal on home loan from banks.
Remember: Consider building a contingency fund that covers expenses of at least 6 months.
> 40 years of age
Advantage: The most obvious is bigger savings and better payment capacity.
Disadvantage: The individual is closer to retirement and will also be planning to save for retirement. Also, banks will only sanction a home loan with a maximum tenure of 15 years.
Whatever your age when you decide to buy a home, understand your finances and plan the execution well. At the end of the day, financial planning is critical.
