Publication details: Money Money Money – 05-10-2016
Responses, opinion and view from Kartik Jhaveri
Buying a home together is one of the most major decisions you may take as a couple and probably the most expensive one as well. It can be a daunting process hence it is extremely important to proceed with caution towards buying your dream home. In order to help couples move in the right direction, there are certain points/tips that can be considered while purchasing a property…
1. Plan your budget: Decide on a budget that you are comfortable with and don’t exceed the maximum you can afford. Have an idea about the size and design of the house.
- If you plan to stay in your new house for many years to come, then you need to consider various future circumstances.
- Kids, owning pets, parents moving in with you…. All these are probable future events that would require additional space. Thus keep in mind your future plans and decide on the apt size of the house.
- At the same time do not buy a property that is too big for you, as maintaining a big house could prove to be expensive.
- Parking space – Will car parking be provided or do you have to pay extra for it.
- Safety and security – Are there proper security measures such as security guards, proper fencing, security cameras, etc. Similarly are there adequate safety measures installed such as fire extinguishers, alarms, etc. OR would you need to spend more on this?
2. Plan your cashflows
- Purchase: When it comes to financing property purchase, there are 2 options available –
- Purchase it outright OR
- Make the down payment (generally 20% of the property cost) and take a home loan for the balance.
- Loans & Funding: Taking a home loan is a good idea if you do not have the money. If you have the funds you may consider taking such leverage (provided you can afford the cash outflows) so that you may gain tax advantages too. In early years of your life, it’s ok if your EMI even touches 50% of your monthly income.
- Get a pre-approved loan
- Before you zero down on a property, consider getting a pre-approved loan. This will help you know how much loan you are eligible for based on your creditworthiness.
- However pre-approval is usually valid for a set period.
- Ongoing maintenance charges – Moving into an building that has various amenities like swimming pool, gym, clubhouse, garden area, etc. will call for a higher maintenance fees, whether you choose to avail of these amenities or not.
- Other expenses: Do not forget to consider rise in future expenses due to a change in family circumstances (such as birth of a child) and determine how much can you really afford to pay.
3. Some financial planning tips while making a real estate purchase decision –
- Maintain liquidity
- Whether you buy real estate for self consumption or as an investment, make sure you have a good backup of liquid assets.
- As a thumb rule, maintain a 2:1 ratio between other assets and real estate.
- Secure financial goals
- After meeting your financial obligations, invest the surplus money into wealth creating assets such as equities to create long term wealth.
- You can even prepay your home loan at regular intervals using the accumulated profits from your investments.
- Consider taking a term cover in order to safeguard your financial liabilities and goals.
- Insure your home with the help of a home insurance… For the structure or contents.
4. Can’t afford… Start saving up
- If your dream home is still looking far away, start saving up for it from now.
- Put away your monthly surplus into wealth creating assets such as equity mutual funds to start accumulating a sizable corpus for the down-payment.
5. Crystallize your decision/ decide on preferences
- Locality – Prefer a location which has a shorter commute to the workplace or is well connected to all modes of transportation.
- Proximity to facilities and amenities – Such as hospitals, schools, shops, supermarkets, grocery stores, chemists, gym, etc
- If you intend to move out from the new house in a short time, then think hard on your decision to buy a house. Unless you plan to rent out the property and live in a another place at a lower rental.
6. Do your own research
- Once you have decided on your preferences, you must then do an in-depth research on the options which fit your criteria.
- You can browse through various real estate listing sites that provide a variety of information including pictures, layout, space, nearby surroundings, etc. on a wide range of properties.
- You must also visit the respective properties and check them first hand. Speak to potential neighbours and try acquiring information that is critical in making a sound decision.
- Check the construction history of the building – How old is it? Are there any repairs or replacement to be conducted?
- Ensure the builder is well reputed. Check out other projects of the builder to get an idea of the state of these projects.
- Check that all the necessary certificates and clearances have been obtained by the builder.
7. Find a good real estate agent
- Consider hiring a real estate agent to get access to a host of options as per your preferences.
- Real estate agents can help you get a good deal and handle a lot of paperwork involved in purchasing a home.
8. Decide on the title
- Have an open discussion with your partner with respect to the ownership pattern – Do you want the property to be in single or joint names.
9. Get the paperwork in order
- One of the important parts of a property deal is signing an agreement before buying the property.