Purchasing a house is a significant milestone that needs careful consideration. Bear these points in mind before managing the budget:
- What are your expenses?
- Interest rates for home loans are now available
- Down payment on a home loan
Only after you’ve thoroughly considered these considerations should you proceed to budget. Financial planning is crucial, especially if you are a first time home buyer and purchasing a home with a loan. Here are some budgeting suggestions when buying a house.
1. Expenses for a Month’s Worth of Living
Purchasing a home is a major financial commitment for any middle-class family. On the other hand, with such high property prices, no one can afford to buy a home without going into debt. According to my research into various scenarios, you will need to lower household spending by at least 25% – 40% after purchasing a home with a home loan. It is not a simple undertaking since you are accustomed to a certain way of life. It’s vital to save away at least 6 months’ worth of household costs as a reserve in case of a future financial shortfall. The reason for this is that you and your family will require some time to acclimate to your new lifestyle. Banks can provide you with the best rates for house loans.
2. Aside from the EMI, be aware of other expenses
We often overlook the additional costs of home ownership, such as the monthly EMI, until they become a financial burden. Make a budget, bearing in mind that the inevitable deterioration of your property will put a strain on your resources due to utilities, repairs, and upkeep, among other things. You must include these costs in your budget and determine whether they are appropriate for your finances based on your home loan rates.
3. Existing Debts/Loans
Before taking out a Home Loan, you should pay off any previous loans or obligations, such as a vehicle loan or a personal loan. Given the enormous liability of a home loan, serving two loans at the same time is nearly difficult. Second, by paying off these unsecured debts, you will raise your CIBIL score, which will help you, qualify for a home loan.
4. Source of Consistent Income
If you do not have a consistent source of income, your entire financial strategy might be thrown out of the window. It is a good idea to put off buying a property until you are confident of your job security.