Wednesday, 4 May 2016
Things To Remember Before Buying A House
Every individual wishes for their own home at a certain age and aspires to invest in their new home without any hassle. Purchasing a new house comes with many prerequisite responsibilities. It is very important to consider certain things before making the investment. Given below are few basic points that everyone needs to consider before purchasing a house.
Buy or Rent
It is always better to do a practical analysis whether you need to buy or rent a house. There are varied online forums that enable you to understand all parameters of home buying including amount for down-payment, prices of houses, home loan ROI, house price projected appreciation, rental charges and more. This would give you a better idea of what you should invest on.
Duration of Stay
With job opportunities stretching all across the globe, there are possibilities of moving to different locations. This implies renting a house. Under such circumstances you need to know if you can buy a house and pay the EMIs along with paying the rent. Make sure you buy a house if you are planning to stay there for at least 10 to 15 years.
Calculate Additional Cost
Always consider additional expenses like legal costs, charges for maintenance and parking, location charges.
Affordable Home Loan EMIs
Please note that EMI for home loan should be 40% of your net income if you have not taken any other loan. If the EMI exceeds over 50% you are likely to fall under other financial downscales. Therefore, do not leverage on loans that disturbs your finances.
Rise of Property Value
It is essential to evaluate whether the price of the property would appreciate quicker than the rate at which the loan is being paid. This would let you understand if it is a wise investment.
Possession of Contingency Fund
Selling property at short notice and breaking it up in parts in not an easy task as real estate market is not a liquid investment. It is necessary to have an emergency fund that takes care of subsequent expenditures for at least 3-6 months. Moreover, several banks offer home equity loans, top-up loans and overdraft facility. These can unlock property value only if it has no outstanding loan against it. It is advisable to possess adequate investments in near-cash instruments that could be used in case of emergency.
When Source of Income Stops
Always be prepared for the worst circumstances. In case your income is in standstill you must avail insurance cover that is equal to outstanding loans. Note that certain simple term plans would help you cover your lives for permanent amount.
Analyze Rental Income From Property
Investors may want to avail dual income from the property, like rental income and price hike capital gains. One might think that rental income is adequate for the EMI payments. However, in many Indian cities it is much low. Hence, it is important to understand the rental income of a property before investing on it.
Therefore, it is very important to have a thorough knowledge of the property before buying a house. An unplanned purchase might put your finances in trouble. So, plan wisely before buying your new home.