Buying a home is not just a matter of instinct. It requires planning and foresight
By Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd | New Delhi | March 8, 2016 12:33 PM | Financial Express
Many Indian women today are well educated, have good jobs with excellent career prospects, and even hold important government or corporate leadership posts. They certainly have the ability and confidence to craft their own lives, and are very much able to fulfill their dream of owning a home regardless of whether they are married or not. A self-owned home is rightly seen as the top security anchor and the best foundation on which to make long-term life decisions.
In fact, even married Indian women today are more often than not active financial partners in their families. Apart from being earning members, they also have a complete grasp of the family’s current and future financial abilities. Developers are very aware that the woman plays a leading role in a family’s home purchase decisions.
Buying a home is not just a matter of instinct. It requires planning and foresight. For women who are looking for suitable properties, here are some points to consider:
Prepare For The Initial Costs: First-time home buyers have to set aside considerable amount for down payment (or your contribution towards home loan). However, keep in mind that property purchase involves several other initial expenses such as stamp duty and registration costs, utilities connection charges and insurance and taxes. Apart from your down payment you need to have additional funds of at least 6-7% of the base cost of the property. If a broker’s services are used, even a negotiated fee may be a significant amount.
Not having the required capital to cover all initial costs can prove to be a dampener on home purchase plans. It is not necessary to have the entire corpus in one’s savings account, since personal loans are always an option. However, women who are just starting out in their careers should not allow themselves to fall too deep into a credit trap. If they avail of personal loan to cover the initial home cost, it should be to the minimum possible extent so that repayment does not become an issue on top of servicing the home loan. It is always best to use free and clear capital as far as possible.
Be Confident About Monthly Outgoings: Anyone eyeing a property purchase should first figure out the monthly mortgage and whether they will be able to afford it. Online mortgage calculators can be helpful, but they will only tell you the value of the principal and associated interests. There are other monthly expenses involved in home ownership, and these include insurances, taxes, maintenance charges and utilities charges.
For working single women, it is important that all these amounts put together do not exceed 35-40% of their net income. Do not neglect your overall cost of living before deciding on how big a home loan you can safely service, and keep in mind that property is not the only investment you should make towards your ongoing financial security. You should also put at least 10% of your monthly income into a retirement plan.
Often, the full implications of having over-committed on a home loan do not dawn on the borrower until the home loan has been serviced for a few months. By then, it is too late to modify the financial plan. When it comes to home purchase, every financial angle must be examined well in advance. It is advisable to use the services of an experienced financial planner or someone informed on such matters. The process of buying a dream home should not turn into an unexpected nightmare at any point.
Be Realistic And Maintain Forward Focus: Your first home is not necessarily the only home you will buy. Remember that you can always upgrade in future if required or desired, so there is absolutely no need to buy the biggest possible flat now. Never compromise your current financial viability by buying a needlessly expensive home.
When it comes to real estate, it is always good to upgrade as financial ability improves, but this process should be planned out over the entire course of one’s working life. To plan to upgrade to a bigger and better home, it is very advisable to invest (and stay invested) in good mutual funds which deliver more returns than savings accounts. Direct stock market speculation into single company stocks and bonds as a potential source of real estate funding should be avoided, as such investments are not sufficiently diversified to offer safety.
Shop Around Extensively For Home Loans: When it comes to choosing the right lender, do not go by the recommendations of friends or relatives alone. Do extensive research on the several different lending institutions available to you. Remember that as an Indian woman, you are entitled to ask for a lower rate of interest on a home loan – be sure to insist on this benefit.
The home loan market is very competitive, and banks are falling over themselves to attract customers. This must be taken advantage of. A woman who is shopping around for a home loan should make specific inquiries about special interest rates and other incentives that a bank is offering to women borrowers. Asking the right questions will establish you as an informed borrower and encourage the bank to offer you the best possible structuring.
Never take the first thing that is offered to you. Most banks have considerable margin of flexibility to accommodate borrowers who know what they want and are determined to get it. If you are married, the ideal scenario is to take a joint loan with your spouse. This is also the arrangement that banks prefer most, since it reduces their risk.
Be Sure Of The Developer’s Credibility: Every day brings new stories about buyers who have been hoodwinked by unreliable developers. Either the project has been unreasonably delayed, has never even taken off or the delivered property (or amenities and facilities) are grossly different from what was initially promised. Do not fall into such a trap. Make sure the developer has a strong reputation by doing multiple checks with reliable agents, the home loan company and also on the Internet. It is advisable to patronise only established developers with a readily verifiable track record for timely completions and 100% adherence to the agreements they make with their customers.
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