Living in their own home is indeed a big financial goal that every person has. Investing in a home is a big-ticket purchase and one needs huge money in order to do that. Although you get a home loan, it is not going to be enough. You should also have hefty down payment money at your disposal. Apart from down payment, you should also have extra cash in hand for stamp duty, property tax, and registration charges. Buying your dream home can sound as a privilege however setting up money for it is hassle some. If you start saving at an early age, say 25 or 26, you will be able to save up enough cash for your purchase.
This is the first thing that you have to do. Get started without worrying about arranging heavy funds at once. Remember that it is a time taking process, although you will be able to arrange the money it is not going to happen in a day or so. Have a clear goal of when you want to buy and how many months of time you have till you get your down payment ready. There is a rule of thumb that one has to follow whilst they are investing in real estate- not more than 25 percent of your net salary should go towards mortgage. This rule is something that you have to stick to the point. Keeping this in mind, start saving, even though it is a small amount only.
Remember, this is quite important. Starting from your home to your shopping list, everything needs to be cut off a bit. This will help in saving up required money for your first home. Until you save enough for the down payment, it is advisable to stay below your means. This will not only save you a lot of money but at the same time you will be one step closer to your dream home. So, keep that in mind and start cutting down all the luxuries and also make some adjustments in your mandatory needs such as grocery shopping, etc.
Now it is time for you to make some smart decisions. You cannot get a corpus fund of the down payment if you just let money sit in your savings account. You have to invest them somewhere so that you can get compounded returns. Some of the options that you can try out are mutual funds. You will get an interest of 10-18% here but it can be risky at times given the type of investment you have made. On the other hand, you can save the amount in a PPF account where you will get returns of around 7-8%. This is a completely risk free option. You can also invest in the stocks if you have enough idea about it.
Pick up a side hustle, do something that interests you as well as pays you other than your regular job. More money means increased savings for that month. This is something that you have to think about. If you have time and work a part time job or take up some freelancing projects, get on it without thinking anymore.
In a systematic investment plan, you are supposed to invest a fixed amount in the mutual funds. This amount can be as low as 500/- or more. You can bear the fruits of compounding and the averaging of rupee cost. When you keep on investing without worrying about the market fluctuations, you will get more units when the market is low and less units when the market is high. Either way you will get the compound interest that will keep the cash flow going.
The loan tenure that you are opting for is going to matter a lot. Take a loan for a long time so that the EMIs that you will be paying would be less on a monthly basis. At the same time invest your money somewhere and get ample returns that will cover the EMIs.
This may not be possible for everyone but stretching your EMIs for a considerable amount of time is always a good idea.
The Indian government offers Credit Linked Subsidy Scheme under the Pradhan Mantri Awas Yojana scheme. This scheme covers so many section people such as EWS (economically weaker section), LIG (low-income group) and the middle-income buyers. You will get a subsidy on the payable interest of your home loan. The subsidy will be directly transferred to your account, so that is not something you have to worry about.
If you are a home buyer with an annual household income between 6 to 12 lakhs, you will get a subsidy of 4% on loan amount of up to 9 lakhs. If your household income is in between 12 to 18 lakhs, you will get a 3% subsidy on a loan amount of 12 lakh.
If you are from the EWS section with an income up to 6 lakhs, you will get a subsidy of 6.5% with a loan of up to 6 lakhs maximum.
Banks generally tend to focus on the debt-to-income ratio when they are issuing loans to a lender. So, it is important for you to keep in mind that the more debt you have, the less chances of you getting a loan. So, it is always a better option to clear the existing debt that you have as much as you can when you are applying for a new loan. Keep a check on all the loans, credit card debts that you have and clear them prior to taking out a mortgage loan. Do not purchase anything new on your credit card for the time being.
So, it is a dream for everyone to own a home, however if you don’t have proper budgeting and plan at place, it can make you very uncomfortable. Try and follow these tips to get a bit closer to your down payment.