Everyone wants to quickly buy their dream homes decked with impressive designs and have the required space. We understand their emotions, but they need to be practical too! The cost of a dream home, the loan responsibility afterward, and other such obligations are equally important. So, if the situation demands you to wait for your dream home acquisition, do so! This will help keep your finances in order. But the key is – how LONG should you wait? Timing the dream home purchase perfectly is important and something on which you can err if stayed uninformed. Let us solve this problem for you.
How to Decide the Right Time for Your Dream Home?
To decide the right time, you need to be aware of the property market, home loan dynamics, etc. Above all, you need to assess your earnings and how they are likely to be in the near future. A decision considering all these will ensure a hassle-free experience for you before and after buying your dream home.
First Get an Idea of the Property Market
Surveying property across locations will give you an idea of its price, how the same has been over the years, how it will be in the near future. Generally, property prices keep rising every year, depending on the demand and supply dynamics. Currently, the demand and supply chain of the property market is good for both property buyers and developers. While buyers can choose from the lowest home loan interest rates, property developers benefit from various government incentives such as easy access to credit for property construction.
Check How Home Loan is Disbursed
Knowing the current property price, its future estimates, the home loan market scenario would give you an idea of how much you would require to buy a home. Know one more fact – banks and housing finance companies don’t finance your property purchase fully. Loans up to INR 30 lakh, INR 30-75 lakh and above INR 75 lakh are offered at up to 90%, 80% and 75% of the property value, respectively.
Check Your Savings Up Till Now for Dream Home
So, the property that you searched for costs INR 40 lakh now. If you plan to purchase it five years later, the property would cost around INR 48 lakh. You will most likely get a loan of INR 38 lakh, leaving another INR 10 lakh for you to pay. Add some INR 2 lakh towards miscellaneous stuff, you need to have about INR 12 lakh in five years.
So, what are your savings up till now? That will decide how long you will need to wait if you can’t do it in five years. So, if you have savings worth INR 3 lakh, you will need to accumulate another INR 9 lakh in five years. If we break it down, you’ll require nearly 2 lakh a year and INR 17,000 a month. In case you’re earning only INR 30,000, saving INR 17,000 a month will be an uphill task currently. If your income doesn’t grow adequately going forward, you may have to wait longer than five years.
Don’t Lose Sight of Your Retirement Either
The lack of sufficient income and savings would force you to postpone your dream home acquisition. But postponing it for too long can lead to loan applications being rejected by the lender too. A home loan is offered for a maximum of 30 years, and you must look to get it before you turn 40 at least. After that, if you apply, you will get less than 20 years to clear the loan, assuming you would retire at 60. A much shorter tenure can raise the home loan EMIs high enough for lenders to reject your application. More so when the income doesn’t grow as desired. Maybe you need to buy a cheaper property in that case.