Buying a home is one of the most crucial decisions which involves various important factors to be considered before investing your hard-earned resources. It is a one-time purchase for a number of people, which makes it their biggest financial commitment in the lifetime. Thus, it becomes imperative to consider all the factors and calculate the budget and EMI before investing in a house.
Listed below is an effective criterion which can help you in figuring out the amount you can afford.
It becomes important to ensure that the sum total of your EMIs is not more than 40% of your take-home salary. For example, the people earning Rs 1 lakh per month, should not have EMI more than Rs 40,000 per month. In case you have other loans, there is a significant cut down in the EMI that you can pay on your home loan. If you have other loans, then the EMI that you can pay on your home loan, gets whittled down further. It is equally important to save enough money, through the tenure of the loan, after paying your EMI for meeting your day-to-day expenses and also for some other needs, such as entertainment, education, etc.
Industry experts advise property seekers to save money systematically for making the down payment on the house. This makes up for 20% of the cost of the house, which isn’t financed by the bank. Thus, the people looking forward to purchasing a house within the next three years should opt for low-risk instruments, such as fixed deposits and fixed maturity plans (FMP). Homebuyers who have five to seven years before planning to purchase a house are recommended to go for monthly income plans (MIPs) of mutual funds. The ones willing to take some risk can invest in balanced funds, or even equity funds.
Savings is a must
It is advisable to put aside some additional money, every month while saving money for the down payment. This is helpful in getting a rough idea of the amount you can afford to spend on the EMI, which is totally within your budget. In case the equity market in which you made an investment is an equity fund or even a balanced fund, is not faring well, you get an option of postponing your purchase by a year or two.
also read: Make your home easy-to-clean with these tips
Keeping in mind the aforementioned factors for calculating the budget and EMI, you’re likely to make the best investment decision. Good luck!