30 JUNE, 2021

Owning a home is one of the most common financial goals. People usually invest in a house property only when they are financially secured, which is often in their mid-30s and 40s. However, in the last few years, the scenario has changed as many millennials are now buying their dream home in their 20s and early 30s.

So, if you are one of them, here are a few tips you should keep in mind.

  • Stay Within Your Budget
    While you plan to invest in a house, ensure to stay within your budget. Only after you have fixed a budget, should you start looking for available properties. You can decide beforehand about the kind of property you are looking for- a flat or an independent duplex? How many rooms do you wish to have in your house? Answering these questions for yourself would help you fix a budget and accordingly look for a house.
  • Be Well Informed
    Ensure to gather as much information as you can about the property you want to buy. If you do not have adequate funds, you can opt for a home loan. Before you apply for a loan, make a note of all the aspects that you need to consider. Explore lenders based on interest rates, features offered and customer reviews. You should also check the lender’s website for home loan eligibility criteria, required documents and ensure you fulfil them. Also, check your credit score as it is one of the important factors that determine your home loan eligiblity. Score of 700 is considered to be an ideal one to get home loan approved.
  • Arrange for a Down Payment
    While availing a home loan, it is best to pay a higher down payment i.e. the amount the borrower has to pay from his pocket at the time of home purchase. Usually, lenders ask borrowers to pay a minimum of 10-25% of the cost of the house as a down payment and the rest can be funded by the lender as a home loan. But paying more than that can help you reduce the principal amount, thereby reducing your overall cost of borrowing and helping you get an affordale deal.

Advantages of Taking a Home Loan

Without a doubt, buying a home is one of the biggest financial investments you’ll make in your lifetime. And, home loans will make it easy to check that life goal of yours. Home loans taken at a young age can mean higher loan eligibility, less dependents, more time to increase your earnings. As a young person who has just started his/her career, chances of a default would be less, as there is greater opportunity to climb up the career ladder to build a strong equity.

  • Know the Tax Benefits
    Buying your house with a home loan can help you save taxes. You are eligible for a deduction on the principal repaid up to Rs 1.5 lakh under section 80C of the Income Tax Act. In addition, under Section 24, a deduction on the interest paid on a home loan is available for a maximum of up to Rs 2 lakhs.
  • Choose an Optimal Tenure
    An optimal tenure ensures that the loan is not a burden for you. If you can afford, you can opt for a shorter tenure, where you would pay a higher EMI and close the loan at the earliest. However, if you would like to pay the loan through small EMIs, you can take a longer tenure. But, you must know that a longer tenure would add to the interest outgo and your cost of borrowings.

    Besides, it could be a great time to buy a home now. Post pandemic property valuations are realistic. Some states have reduced their stamp duty to encourage affordable housing. Home loan interest rates are also at a 15 year low. Many developers are offering additional discounts and offers. There could be a scope for serious buyers to negotiate the final price like never before. So, why wait?

    Buying a home at a young age is a commendable achievement. However, you must proceed only after ensuring that you can afford all the future EMIs of your home loan to avoid any default. Don’t forget to keep these tips in mind to help you make an informed decision.               




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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.