Gone are the days of the law stating you can only start planning your home purchase after you are settled (that is, married with kids). A lot of youngsters are now seeing an advantage in the proposition that it is better to start as early as possible when it comes to perhaps the most significant investment in their lifetime.
Buying a home tops the list of crucial life goals, and buying a home early has some advantages. The house either continues to give fantastic returns as an appreciating asset, or you can spend most of your working life free of rent woes. You can also make it a good source of additional income (and minimize your loan EMI burden) if you intend to rent it out.
If you are planning to buy your dream home at a young age, you will find the seven smart tips in this article helpful.
- 1 7 Smart Tips to Buy Your Dream Home at a Young Age
- 2 Home-Buying at a Young Age
7 Smart Tips to Buy Your Dream Home at a Young Age
Be Financially Disciplined to Build a Downpayment
Financial discipline is the cornerstone that can make your dream affordable. You will need to pay the down payment on the house you love from your pocket.
In order to build your down payment fund, you should commence cost-cutting, clear your debts, avoid wasteful spending, and perhaps, try to expand your income pool.
Stick to Your Budget
Where does a more significant part of your income go? Is it on groceries, rent, shopping, dining out, or entertainment? Start analyzing that and categorize your expenses to determine how you spend your money. After that, make a budget.
In this digital age, you do not have to do some things manually. There are several applications available to help you set a budget. You can compare your income to expenses and monitor how you spend your money.
This can help you cut down on inappropriate expenses and save for your down payment. Of course, you don’t have to cut off your lifestyle expenses entirely. You just have to trim them. For instance, if you currently eat out 10 times a month, you should cut it down to about 5, so you can save more money.
Similarly, rather than buying branded groceries for cooking at home, you can consider switching to generic ones or house brands that may come cheaper. The same applies to skipping expensive gym subscriptions to work out from your house, and so on.
Research on Your Dream Home
We all dream of our home, but do you have the details sorted out? Do you wish to buy an apartment, an independent house, or a condo? How many bedrooms do you want? What amenities will you be willing to pay for? Where would you like the location?
The cost of owning a house varies depending on the factors mentioned above (and even more). For example, a house in the outskirts costs much less than one in the city for the same square footage.
Knowing those details means you will know exactly how much you need to save up. However, you should set a budget in line with your repayment capacity. Some people go for a house they can’t afford and struggle with the EMIs later.
Don’t Just Save, Invest
Merely setting aside your excess income in a savings account may not give you sufficient returns. Consider investment.
Fixed deposits (FDs) and recurring deposits (RDs) are risk-free. That is, they are not usually affected by market fluctuations. Although mutual funds are risky and rely on market conditions, they have the potential to bear inflation eventually.
This can be an excellent advantage for you because you will be saving today for a house tomorrow. Based on inflation, the same house will cost more tomorrow. Thus, the higher the risk, the higher the reward. Likewise, the younger you are, the more risk you can take as a result of your fewer financial commitments.
Set Aside Money for EMIs
Home loans do not come cheap. You will have to pay EMIs per month, and that will probably be more than the rent you are currently paying. Therefore, you can use an online EMI calculator to know how much you may need to set aside per month for your home loan repayment.
Once you have an exact figure, it will be a good idea to start channelizing your savings and investment returns to set aside that amount every month.
Enhance Your Credit Score
A good credit score not only makes you eligible for a home loan but also increases your negotiating strength for lower interest rates. As a result of the long tenure of home loans, you eventually pay a lot more as interest, more than the principal amount.
But if you have a good credit score, you could get a more favorable interest rate. You can enhance your credit score by promptly paying your outstanding dues fully, not applying for too many products on credit within a short period, not using more than 30% of your credit card limit, and rectifying credit report errors, if any.
Prepare for Other Expenses
Asides the down payment, there are other costs that will be involved out of pocket. They include stamp duty, registration cost, water cost, memorandum of title deed charges, electricity connection, and so on. There are also legal fees, brokerage fees, home insurance, etc.
It might be quite difficult to factor in all the non-loan charges accurately, but try to have at least an estimate, and strategize accordingly. As discussed previously, your EMI savings will be of immense help.
Home-Buying at a Young Age
Purchasing a home is not an easy task, but delaying the plan may not be profitable either. Indeed, your income will increase later, but so will your expenses due to more financial commitments.
Therefore, be informed, and learn to maximize your money efficiently. You may also need to make sacrifices, but it will all pay off when you receive those coveted keys at a young age.