There is hardly any person in the world who does not want to own a roof over his head. But buying a house is not a child’s play. Before planning to own a home, one must clearly understand what it takes to buy a house.
One should have an excellent financial discipline as well as a financial plan before moving forward to own a house. And they should be completely free of any debt or personal loans. It is because it is next to impossible to repay more than one loan, considering the considerable home loan burden.
One of the most common questions that arise while someone plans to own a place of his own is-
Should I Cut My Small Expenses while Planning for Buying a Home?
The answer to this question is partially YES!
One must apply for a housing loan if they are planning to buy a shelter of their own. They will get the loan sanctioned easily if they earn a handsome amount at the end of the month. But repaying the loan is one of the most challenging things a human can ever imagine.
Without proper pre-financial planning, one cannot pay back the loan amount on time. A bank provides a house loan of about 75%-80% of the total property value, and the individual should pay the remaining 20%-25%.
Financial experts say that ideally, a man should contribute around 35%-45% of the property value on his own. Besides that, one must keep in mind that there will be an extra expense such as Stamp duty, Registration charge etc., which amounts to around 5%-10% of the total value. They should also have some amount left with them for the house interiors.
Tips for reckoning while looking upon home loan against small expenses
There are some key points that one must keep in mind before appealing for a Home Loan-
- One must reduce his expenses if that person plans to own a house. They should be mentally prepared to change the lifestyle they are habituated with. Research shows that one must cut his household expenses to at least 30%-40% after buying a house to repay the loan amount on time.
- If someone has a low credit score, they won’t get any loans from any lenders. One of the best remedies for this is doorstep loans with no credit check. These are unsecured loans, which mean individuals do not have to provide collateral security such as any property to avail of the loan. These loans are offered to people having low credit scores or zero credit scores.
One must have a clear plan before availing of this loan because by repaying this loan amount on time, one can improve their credit score, and if they fail, it will even lower their credit score more.
One must have a secured job before applying for a Home Loan. If there is any impact of recession in their sector, they should not appeal for the loan before things get normal.
They should also have some savings to pay at least 3-5 monthly instalments of the Home Loan in case of any uncertainty, i.e. health expenses, job loss, etc. or emergency situation. They may invest these amounts into mutual funds, bank FD’s, which can be easily liquidated whenever needed.
- If an individual has any remaining short term loan that they took earlier for their business or making any down payments, that must be totally cleared before applying for a home loan.
Many people take short term loans to support a temporary crisis, and these loans should be paid within the due date, which is usually a short span compared to any other kind of loan.
As already mentioned, they shouldn’t have any remaining debts like personal loans, short-term loans, car loans etc., when they are planning for a home loan. There should be some financial plans for how much savings an individual should have or how he can manage to repay the monthly instalments even in case of any unforeseen circumstances because life is unpredictable.
We all have to prepare ourselves for the best as well as for the worst.
In the Nutshell
If one maintains these things, they can surely apply for a home loan from any bank/lender. Rather than emotional decisions, one should focus on well maintained financial discipline and planning before buying their dream house.