In a growing economy, becoming a homeowner can be a huge financial asset. You know that owning your own home means having the freedom to create your dream house while reaping the benefits of a good investment. Usually, this milestone step is usually taken with a partner, to shoulder the hefty costs.
But you can even do it alone; it’s not impossible. Although it may seem like an uphill task, with the right plan in place, you can begin your journey to becoming a homeowner.
Deciding your budget
A budget is the starting point of any big financial project as it gives you, as a future homeowner, an overview of how much you can afford. It also gives you a snapshot of how to adjust your finances. Your budget should calculate your debt to income ratio. This ratio compares your monthly income as compared to how much you spend on fixed and variable expenses.
A common rule of thumb to set aside money for housing expenses is the ‘28% rule.’ In other words, a maximum of 28% of your income should go to home-related expenses. This is because when you do so, it protects your income from the strain of debt. It is crucial to remember that your housing expenses go beyond just the principal and interest of your loan. Investing in a home includes the costs of property tax, maintenance expenses, and property insurance, among other things.
If your debt to income ratio is very high (that is, beyond 43%), you will need to strengthen your finances before looking into a new home. You can do so by investing in a variety of financial instruments to allow you to reap both, short-term and long-term gains. Another way would be to increase your income and pay off more of your debts. Many single-home owners have multiple jobs/businesses and different income streams.
Choosing a location
Next, the location of your prospective property decides not only its liveability but also its growth potential as an investment. You would have noticed that a home in a developing area shows excellent potential for a future increase in value, depending on the plans for the region. For example, if the area will have a metro line or an airport developed in or around in the near future, the prices of property are likely to rise. Thus, it would make for a good investment. Usually, a location with developed facilities, waste management, and proximal transport systems has high value. A good indicator of the property value is the rental rates in the area. On the other hand, market value is an indicator of the resale value for when you sell or exit. Most buyers focus solely on their personal preferences and convenience without taking into account resale value.
In India, many buyers now prefer purchasing homes in exclusive gated communities by Rainforest Estates Goa. The most recent project, Rainforest Woods in Assagao is a 6 4-bedroom villa project. Being in one of Goa’s fastest up-and-coming neighborhoods, close to a plethora of restaurants and cafes, these homes were sold in record time. Visit the Rainforest Estates websites for news of upcoming projects in Goa.
Choosing a creditor
While deciding which loan suits you, it is vital to look at the costs and your eligibility. How eligible you are for a loan depends on your income and your ability to repay your loan. Creditors, like banks, usually use your debt-to-income ratio to evaluate if you are eligible for a loan. When you compare different creditors, the main factors to keep in mind are principal and interest payment, loan amount, processing fees, and the time it takes a creditor to transfer the loan amount. You will be charged a processing fee by the bank for the management of the loan. This can go up to 2% of the loan amount. Also, note that a creditor only pays up to 80% of the property’s market value.
Tax exemptions for homeowners
When you purchase a new home there are several tax benefits and exemptions you can use to your advantage. These deductibles usually depend on how long it takes to complete your purchase or construction of your home. To avail of these benefits, you must dutifully research the terms and conditions. Did you know that about Section 80C of the income tax laws? It states that up to 1.5 lakhs of the principal repayment amount on your home loan is deductible. Not just that, but the costs you pay on stamp duty and registration are deductible too!.
Property Insurance for homeowners
Property insurance protects a homeowner from damages to a house. When choosing an insurance provider, you must keep in mind that different plans offer different levels of protection for varying premiums. You also need to take into account the time taken to pay for damages and how much of the cost will be covered.
As you can see, there’s a fair bit of research required to purchase a home, be it by yourself, with your partner or family. However, it isn’t impossible! All you need is the right research, a good property deal, and a good hold on your finances. Armed with that, you could soon be a new homeowner!