How to Plan Your Finances to Buy a Home in 2018
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How to Plan Your Finances to Buy a Home in 2018

  • Highlights

  • Home loans cover 80% of the total property cost

  • Save enough to make the down payment

  • Avail a home loan when you are young to repay with ease

  • Choose a lender with low home loan interest rates

The earlier you structure your finances, the faster you will be able to become a homeowner. Time your home purchase when you still have a few decades of earning a regular income ahead of you, so that you can finance your home loan with ease. Buying a home with age by your side not only allows you to get a quick high amount sanction, but also help you repay the loan with ease. So, a little planning is all you need to make it work for you.

Here’s how you should go about saving to buy a home in 2018.

Assess how much you need to buy the house of your preference

It goes without saying that first you need to get the calculations right when planning a house purchase. This means finding out how much it will cost you to purchase the house outright. This can vary owing to factors such as size of the house, its age, location, etc. As a thumb rule, the money you need for buying a house comprises two parts—an advance and a lump sum payment.

So, once you have decided on a house of your choice and know its value, then deciding how much you can pay as a down payment will help you evaluate the home loan amount. Instead of manual calculations you can visit lender websites to calculate your eligibility. Bajaj Finserv, for instance, has a Home Loan Eligibility Calculator to help you if you qualify for a Home Loan, along with a potential amount you can avail. Here, you can get an amount up to Rs.3.5 crore for a tenor of 20 years on nominal home loan interest rates.

Understand the difference between lump sum and margin payment

When you first buy a house, you do not immediately pay for the entire value of the house. Rather, you pay only a percentage of the total cost of the house. This percentage or portion of the total is known as margin payment. Also known as down payment, margin money is usually 20% of the value of the property you are buying. The remaining portion or 80% of the market value of the house is called lump sum. Margin or down payment is the first thing you will have to save for to ensure that you have the required amount ready at the time of purchase.

Home Loan EMI Calculator

Arrange money for down payment

Once you know the amount, gathering the capital to be able to make your down payment is your next step. Since banks and non-banking financial institutions do not extend home loans that cover 100% of the house cost, you need to work on this yourself. There are various ways by which you can meet this margin requirement. One way would be to deposit the surplus of your accumulated savings in a long-term FD or in market-linked high-return mutual funds. Once you determine the value of the home you are looking to buy, motivate yourself to save significantly towards that. Setting a timeline for this and saving accordingly will help you build the corpus you need. While you can also take a collateral-free personal loan to finance the down payment, see if your income can support paying EMIs on two loans simultaneously. Remember to al

Evaluate your potential monthly instalments to choose a home loan

The repayment process of a home loans, unlike other loans, is lengthy. So, calculating the EMI amount in advance prepares you for monthly payments better. You can use the home loan EMI calculator available on lender websites to arrive at a number that best suits your financial standing. You can slide the amounts for each component such as tenor, interest rates, and principal to arrive at an EMI amount that you can afford. Now based on your chosen parameters, apply for a loan with lenders. This helps you get a sanction on terms that you are comfortable with.

Of course, finding a lender who offers you the most nominal home loan interest rate is key. Further, look for repayment options that ease your cash flow. For example, some lenders like Bajaj Finserv offer you a 3 EMI holiday at the beginning of your home loan repayment to set your finances in order before starting repayment. Additionally, you can borrow a Flexi Hybrid Home Loan, which allows you to pay interest-only EMIs in the first few years of your tenor. This reduces your repayment until your salary and income increases with time and you can begin paying full EMIs.

It is best for you to plan for home purchase for a new, ready-to-move in home during its initial development stage. So, by the time the booking starts, you have the savings ready for a down payment and can plan your home loan too.

Bajaj Finserv brings you pre-approved offers for personal loans, home loan, business loans and a host of other financial products. Not only does this simplify the process of availing financing, but also helps you save on time. All you have to do is share a few basic details and check out your pre-approved offer.
Need instant financing? Think it. Done with Bajaj Finserv.

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