The earlier you start investing, the bigger your corpus will get at the time of your retirement. The same logic applies when you want to buy a home. Buying property is one of the most important milestones in one’s life because of the huge long-term costs and commitments involved. However, being young isn’t the only parameter to consider while making a property purchase.
Let’s take a look at the various factors that determine the right time for buying a home.
When you’re financially ready
Unless you are ready with the requisite funds for buying a house, you won’t be financially ready to possess it. Even when you take a loan, you still need to raise the margin money, which could easily be about 20-30% of the property cost. Also, you should also have the capacity to repay your loan EMI on time.
There are many associated expenses of property buying that are often not considered by first-time buyers. Property registration, stamp duty, loan insurance, brokerage, repairs, furnishing, monthly maintenance charges, society charges and property taxes are some one-time or recurring expenses that you should be prepared for while making the purchase.
If you are buying an under-construction home, be prepared to bear the costs of delayed possession which come through increased interest payments on your loan. In a delay, you may also need to simultaneously bear the burden of paying rent and paying EMIs. If the delays lead to a legal dispute, the buyer should have sufficient financial backup to deal with the situation.
Financial readiness, therefore, is one of the most important factors in buying a home. It’s hard to say when it will arrive in your life. It could be your 20s or your 50s. When you’re ready, go for it.
When age is on your side
When we speak of age and its impact on the home loan you wish to take, the best time to buy property is when you are young. Assuming that you are financially ready for buying a home, you will probably still need a loan to finance your purchase.
Lenders normally allow up to 30 years as the longest tenure for repaying a home loan, provided the applicant’s age is no more than 30 years. Lenders would prefer not to give you a tenure that continues beyond your retirement, which is typically 60 years.
Property prices are increasing gradually every year, therefore delaying your purchase would make it more expensive. Younger people can avail longer loans and avail the benefit of easy EMIs. Paying the EMIs would also become easier over the years as the borrower’s income steadily increases while the EMI may remain constant. This also allows the borrower to raise extra funds to close the lone before tenure.
Trying to get a home loan later in life would mean that the borrower is closer to his retirement age. Therefore his tenure would be smaller, implying steeper EMIs.
When your dream home is finally available
Given the massive costs involved, you should really like the home you are buying. It should fit your requirements. You should be comfortable with its location, its size, construction, and costs. Suppose you live in Mumbai and your office is located in Bandra. You get the chance to buy a home close to Bandra at a very attractive rate with all the amenities and connectivity that you seek. You have assessed the social and physical infrastructure available in the locality and find it worthy of your family’s needs. You would not want to let go of this chance. The choicest properties in metropolitan cities get bought quickly. If you are financially ready, have age on your side, and can repay the debts comfortably, you should go for it.
Buying a home at an early age allows you lots of time to pay your debts and also complete all your other financial obligations. But you should ideally wait till you have all ticked all the boxes on the list of your property requirements.
Once you are convinced about committing to a house for the long term, you have sufficient income and liquidity, when you don’t foresee a major expense in the near future, and your dream home is available to you within the budget you have, it is the best time to buy a house.
The author is CEO, BankBazaar.com