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The Right Age to Buy a House and How to Make it Affordable

December 04 2018

Start early to build the corpus for buying a home

Buying a house is a dream for most of us. An essential financial goal, the joys of living in an own’s house are unparalleled. While there are many philosophies on the right age to buy a house, in reality, none of them are fool proof. It’s because each of us are different in terms of income, risk appetite and financial liabilities.

An Early Start is the Key

However, experts believe if buying a house is on your radar, an early start is crucial. To put it simply, when you start earning, you must save a part of your income to accumulate the desired corpus with the stipulated time frame. When you start early, even if you fail to collect the entire sum, at least you should be able to collect enough for making the down payment.

An early start gives you a chance to review your savings on a periodic basis and increase it with time. It’s important to factor in inflation in the process as it reduces the purchasing power of money. If the current value of the house you intend to purchase today is ₹30 lakhs today, even a modest inflation rate of 5% would push its future value to over ₹53 lakhs, 10 years down the line.

Channelling Savings Towards Prudent Investment Avenues

While savings are one side of the coin, channelling them into prudent investment avenues for growth is another. Thankfully, there are various asset classes that you can use to grow your savings to accumulate the desired corpus for buying a home.

If you are a conservative investor with a low-risk appetite you can opt for fixed-income instruments such as bank fixed deposits as they offer assured returns. Also, FDs are latent to market volatility and the end corpus doesn’t dip in an event of a downturn.

On the other hand, if you are an aggressive investor, with a stomach for volatility, you can opt for equities. However, instead of investing directly into equities, you can opt for systematic investment plan (SIP) in equity mutual funds as it spreads out the risk over a period of time.

Investing a small amount regularly into equity mutual funds over the long-term can help you build a sizable corpus for buying a house, or at least fund the down payment required.

Home loans: Making Home Buying Affordable

The evolution of housing finance companies has made home buying a relatively hassle-free affair these days. Based on the market value of the home you wish to purchase, you can obtain home loans from these lenders. Typically, you are sanctioned a loan amount equivalent to 70-80% of your home’s market price, while you need to pay the rest as down payment. The higher the down payment, the lower will be the dependence on loans.

A healthy credit score (750 or more) coupled with responsible financial habits such as paying bills and outstanding credit on time can help you procure a loan a competitive interest rate and flexible tenure. Equally essential is to research before settling on a lender to make an informed choice. There are various aggregator portals where you can find offerings from multiple lenders. Visiting these portals would help you make an informed choice.

Opt for Loans on Floating Interest Rates

While home loans have made buying homes more affordable, opting for them on floating rates can further spell convenience. Floating rates depend on the dynamics of the economy and in an event of a rate cut, the same will be passed on to you in form of reduced EMIs. Also, floating rates are usually a little lower than the fixed rate of interest.

Home Insurance: A Must for Every Homebuyer

Now, that you know how to make homebuying more affordable, it’s essential to cover yourself and your home from financial implications arising out of eventualities. A home insurance or property insurance gives you the cushion against mishaps to your home and its belongings in an event of theft, burglary, fire, earthquake, etc.

Home insurance plans can be purchased either for the entire structure or its belongings. Before buying a particular property insurance, do check out the inclusions and more importantly the exclusions, to prevent disputes later.

You can calculate the applicable premiums easily from online calculators available. Just like home loans, there are various aggregator websites that help you in comparing various home insurance plans.

Buying a home is a big decision and for most is a one-time exercise. While planning finances is an important aspect, it’s equally essential to ensure its safety and a home insurance policy helps you to protect one of your most prized assets.

Related Article:

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