Taking out a home loan for the first time can be nerve-wracking because we have many questions. Doubts about whether it is the right time, whether the property is suitable, which bank to seek a loan from, and so on continue to arise.
While an assortment of financing options is available for homebuyers and may appear overwhelming, researching the fundamentals of property financing can save you significant time and money.
Understand the market and the property location and whether or not it offers lender incentives. This trick may result in extra financial benefits for you. And by carefully reviewing your finances, you can ensure that you are getting the best suitable deal for your home loan.
Hence, in this article, we have outlined some crucial details that homebuyers need to make their big purchase.
1. Manage Your Finances; Cut Extra Expenses
When dealing with any loan or investment, your first goal should be to manage your finances and maximise your cash flows. To accomplish this, create a monthly budget and stick to it throughout the month; this will help you keep track of your income and expenses.
Be sure to include your monthly payments, which represent your outflow of funds and your monthly investment returns. The most effective solution to such problems is to change your lifestyle, and you must cut corners and lower your consumption needs to meet the EMIs. Either you can make changes on your own or look at different repayment plans and tweak your payment schedules.
2. Market Research
Conduct market research to find a home that meets your needs and is within your budget. To get the best deal in the market, you can physically visit under-construction houses, search websites, speak with property dealers and only lend your capacity.
Knowing and having a basic sense of the real estate market and home loans can help you save a lot of money.
3. Check Your Affordability
Having established your buying capability, determine the home prices you can afford.
Don’t make rash decisions when selecting a property. Only choose a house whose financial burden will be within your current ability to handle. Don’t assume promotions and appraisals will help you tide over the payments with wishful thinking.
Consider factors such as safety, location, and public transportation accessibility, among others, in addition to affordability. Evaluate the property’s cost potential and whether it has the prospect of improving in value over time.
4. Discover Multiple Banks
Do your homework thoroughly. Refrain from entering into a transaction with the first bank you speak with. Make sure you shop around, compare the various deals different banks offer, and choose the best deal available. People sometimes rush into an agreement with a bank only to discover later that another bank could have made a better and more profitable decision.
5. Go For Large EMIs‘
Buying a home when you are young is recommended because you have fewer responsibilities. You can afford a larger EMI towards your home loan when you are not facing financial difficulties, and your life is going smoothly. As a result, you will have a lighter burden as the loan term will be shorter.
By doing so, you can save money on interest as well.
6. Hold Contingency Funds
Some people purchase a home without considering its liabilities, and they end up forfeiting the purchase, causing their credit score to suffer. Unexpected events can happen to anyone, and one must exercise extreme caution.
Ensure you can cash in an emergency with a contingency fund at hand, such as an FD. You can also have a PPF fund that can be used in the event of an unfortunate incident. These emergency funds could be life insurance deposits, FDs, or any mutual funds you have invested in.
7. Consider Partial Prepayments
The longer you wait to repay the loan, the more interest you will be charged. Partial prepayment is a quick way to reduce your loan tenure and loan obligation. There are numerous advantages to partial prepayment. Most banks do not charge a fee for this service.
One-time gains such as bonuses, substantial profits on stocks and shares, income from property sold, tax-saving investments maturing, gifts from parents or family members, rental income, and many more can be applied to partial prepayments.