Buying a home is a long and tiresome process. While everyone wants a house of his own and own roof over the head, only the privileged ones get to buy their own house. Buying a house sets an important benchmark in the lives of people which is associated with pride and achievement. It is not only about willing, it is a financial decision. Your bank balance needs to be ready before you are. The prices of the property are rising and buying even a small piece of land costs a fortune. Buying own house is not within the reach of many people in spite of being a basic necessity. As such home loans are the best way to fulfil the dreams of the middle-class people.
But one needs to evaluate how much home he can buy and by that we mean how much loan he can afford to draw. Many people end up drawing a loan more than they can afford and as a result, hardly meet their ends till the loan is paid.
Here are some things that you need to take into consideration before buying a house on loan for timely repayment.
1. Your income
No doubt, the important factor to take into consideration is your earnings which are going to pay for the loan. If your loan is more, the instalments are going to be huge. It would become impossible for you to manage the monthly expenses at the balance amount. So, always buy the house whose monthly EMI instalments do not disrupt your monthly budget. From your monthly income, subtract the EMI and then the expenses, if the balance is in fairly positive, go ahead. Do not think for buying the house if the balance is negative or negligible. Being prepared for the rainy day should be your top priority.
2. The upfront booking amount
The next thing that needs to be taken into consideration is the down payment. It usually varies from 10% to 30% based on the payment plan that you have opted for. Sometimes, that percentage may be as huge as 75%. But since the property prices are huge, the down payment is usually in lakhs and one need to be committed to paying that. Also, the loan amount depends on the down payment of the house. If this amount is more, the banks also would be offering you more as a loan.
3. Credit Score/ CIBIL score
The lender checks the repayment record of the borrower to judge whether or not he would be paying the loan on time. The same score can be used by you to assess yourselves. If you have paid the previous loans on time, the probability is you will manage this one too. Always keep in mind one thing while taking a loan, if you are unable to pay it on time, no one would consider you dependable enough to lend money.
4. Outstanding loans
There should currently be no outstanding loan on you. Managing two loans at a time is quite difficult. The bank also considers this loan as your monthly deductions and hence, puts an upper limit on the loan withdrawn. The EMIs, thus, become smaller. To repay the loan on time, consider taking a loan after paying the current loan in full.
So, these four factors would tell you what needs to be done. A wrong investment can easily clear your bank balance and leave bankrupt. If you can really afford the house, go for the lower interest rates. You will have to pay a huge amount at the time of possession too. There are the registration charges and the stamp duty tax. Be prepared if you are buying a house more than your budget.