Owning a house remains the middle class family’s biggest goal. Time was when you couldn’t even dream, of buying a house till you were into your middle age. These were days when years would be spent stashing away money for 4 walls and a roof – No longer. The Market is flush with lenders tripping over each other with offers of loan at competitive rates, which bring your dream house within reach. The best time to buy a house is when you are young, when you have enough time left to enjoy that home and see it grow as an investment, to live at least half your life with the confidence that comes from owing property. And it can be done.

Advantages of owing a home

  • Provides a sense of security
  • Builds equity
  • Provides stability
  • Is an asset you can fall back on in times of need buyers
  • It is easier to buy property today, owing to stability in prices and tax benefits that can accrue to you by investing in housing
  • Real estate fetches an 8-10 per cent annual return. Therefore, appreciation is guaranteed over a period of time.
  • Gives you a free hand to make alterations in the property.
  • You are not dependent on the landlord to maintain the property.
The rate of mortgage interests i.e. the interest charged by the housing finance company on home loans is low compared to earlier time. Hence in this interest rate scenario, home loans have made owning a house for the middle class a reality. The Income Tax Act provides for deduction on interest payable on capital borrowed for acquisition or construction of a property. With such tax concessions if makes sense to own a home by availing a housing loan. The rent is usually about 20-25 percent of your monthly income as compared to the 35-40 per cent that goes towards EMI. However, the annual tax saving on EMI means that the actual figure comes down to roughly 30 percent of your monthly income.

1
The Budget

  • Assess your post tax monthly income, Deduct tax saving contributions. Ditto for other earners in the family.
  • Provide for credit card debt and other loan payouts.
  • Provide for monthly household expenses
  • Now, set aside around 5% for contingencies
  • Add up your savings you will need to put down your contribution of 10-15% as Housing Finance Companies will fund only between 85-90% of the property value.
Now check if you have enough for the E.M.I’s Plus maintenance expenses. Don’t forget to budget for the tax breaks you get on your loan repayment. Typically, lenders will ensure your EMI’s doesn’t exceed 50% of your take-home pay, post-taxes and other deductions.

2
The Loan

  • Screen lenders on total financing cost and convenience.
  • Get pre-approvals from shortlisted lenders.
  • Check out property fairs for better rates
  • Check if your employer has a tie-up with a lender, corporate discounts can lop off more than 1% in interest alone
  • Today, lenders are vying for your custom, so play them hard against each other for the best bargain.
  • Get a list of pre-approved properties from lenders. Borrowing will be a breeze if the property you zero in on is on your lender’s list.

3
The Search

  • When you go house-hunting, you’d like to consider;
  • How far you’d be from work
  • How far you’d be from your kids schools
  • How far you’d be from reliable medical help
  • The quality of civic amenities (water, electricity, waste disposal etc)
  • How accessible social amenities like markets, clubs and parks are of course, the ideal in the above terms may not match your budget
  • Now you want to match your budget with your requirements and what’s available
  • And make the necessary trade-offs
  • To know what’s available, you will scour the advertisements ask friends and neighbours, and may want to check out property fairs
  • Once you have finalized the projects check the past record of the builder and visit their completed projects.