5 Mins September 29, 2022
A house is a big-ticket investment and hence a big financial decision. While home loans are easily available, you should be prepared to shoulder the debt obligation. Even if you avail
of a home loan, you will have to make a down payment for purchasing the property. This may vary between 10 and 25% of the value of the house, depending on your lender.
Considering this, how do you know if you are truly ready to purchase a house? Well, here are five key things you should consider:
1. Additional costs- Purchasing a house involves additional costs, viz. stamp duty, registration fees, parking charge, society maintenance, and interior decoration expenses among a host of others. You need to account for these
in your budget and assess how you are going to bear these costs.
2. Savings- If you have set aside enough money for the down payment, are comfortably meeting your daily expenses, have planned for other vital financial goals, and in general, are maintaining good financial health, then perhaps
you are ready to purchase a house on a home loan. But never use your emergency fund (also known as contingency fund or rainy day) to make the down payment for the house.
3. Debt-to-Income Ratio- This ratio reveals total monthly debt obligations vis-à-vis the net monthly income drawn or the Net Take Home (NTH) pay from all sources of income. If you have very low debt or no debt, maybe you
could consider availing of a home loan. But keep in mind, that a home loan is a long-term commitment with a loan tenure of usually 20-25 years).
Ideally at any point in time, as a thumb rule, your debt-to-income ratio should not exceed
40% of your net monthly income or NTH pay. If your debt-to-income ratio is already high, it may not be wise to add to your debt burden.
Nature of Income- It is essential to assess whether you have a stable and well-paying job or are depending on a variable source of income. In the case of the latter, you may not want another level of uncertainty if you are already
not earning a very respectable sum of money every month. But if it is the former and your career looks bright, you may be ready to purchase a house on a home loan.
4. Housing market conditions and interest rate cycle- Apart from the above, also evaluate the housing market conditions in the region or area you are considering purchasing the house property. It may be an opportune time to buy
when the housing market looks depressed or has corrected -- as it makes it relatively affordable -- as against when it's booming.
Amidst times of slowdown, when home loan interest rates are lower, banks and housing finance companies offer home loans at very competitive rates. Besides, builders/developers
offer discounts, plus several freebies viz. free parking, free clubhouse membership, free gold coins, free home appliances, etc. This is what happened during the COVID-19 pandemic, proving to be a deal sweetener for many home buyers
[Also Read: What Type of Home Loan is the Best one for You?]
If you are considering purchasing a big-value asset such as a house property during this festival season, don’t let emotions override your decision-making ability. Make use of an online Home Loan Affordability Calculator to help you take
a wise decision. By entering details such as your net monthly income, the down payment you can pay, the home loan amount you require, the interest rate, and the tenure of the loan you can figure out a budget for your house purchase.
Always
be clear about how much down payment you will need to pay and assess if you would be comfortable repaying the home loan by using Axis Bank’s home loan emi calculator. You can
also find out more about home loan eligibility. Borrow within your means, plus evaluate whether the housing project has the potential to yield any significant
capital appreciation over the long term.
Reach out to Axis Bank for the best home loan deal this festive season.
Disclaimer: This article has been authored by PersonalFN, A Mumbai-based financial planning and mutual fund research firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN 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.
