Decision to buy a property should always be backed by Financial Planning rather than an emotional decision. If you do not plan your dream property properly and you are not able to pay your monthly installments in time, you might get into a bigger trouble. The credit history will start dropping, interest rate on the default payments is high and bank might come up with an eviction notice.
Financial property is a very critical if you are buying a property, therefore let’s discuss some points which require attention before you take a loan.
- Monthly Household Expenses: Buying a property is always a stretch and on an average one has to cut down household expenses by 25% – 40%. It is not an easy task as you are used to a specific lifestyle, therefore real expectations are to be realized before getting into it. It is critical to keep aside at least 6 months house hold expenses as a reserve to meet any future deficit.
- Loan Amount: Banks mostly gives loan amounting to 80% of the property value and you are supposed to contribute 20% without raising any other loan or debt. It is advised to contribute about 40% to reduce the burden of installments.
- Next 6 months liabilities: It is important to plan for the next 6 months of liabilities in advance as well like Insurance premiums and school fee. This provide you with ample time to adjust to your new lifestyle.
- Existing Loans/ debts: One should clear the existing loans or debts for cars, personal loans etc before getting a property loan. Plus by clearing your debt you will improve your credit score before availing the property loan.
- Three months EMI as reserve: It might be a small amount considering the cost of the house but it is important to keep 3 months of EMI handy as a reserve. This reserve will be handy for any unforeseen circumstances you are unable to pay your installment on time.
- Regular income source: In the absence of regular income source the entire financial planning can go for a toss. If you are working in a sector which is easily impacted by recession, it would be wise to postpone the purchase till you are sure of the income stability.
- Budget for furnishing: Most people tend to overspend on interiors are they are not planned properly initially. If it’s a commercial property you will have to create a cabin and require furnishing and wiring for the machines, on the other hand if it is a house you should know all what you want to buy new and things which can be used as they are.
- Emergency fund utilization: The emergency funds which you have created can be invested into easily liquid able banking instruments with low risk as FD, recurring account etc. May you never have to use your emergency fund and while it being there, it should give you some return. But do invest it for short intervals only.
I hope building a property be a pleasant experience for you and your family, the above plan your dream property mentioned points will help in better financial planning and insulate you from uncertainties of life. We at Aegeus Financial Services provide comprehensive solutions to customers from How? When? Where? for properties, projects, financial planning, restructuring etc. Please feel free to get in touch with us at 7669973838 or visit us at aegeusfs.com. We are trying to create a better and more aware financial world.
