Home loans can prove to be extremely helpful, especially as, buying a house with up-front payment is nearly impossible for a vast section of society. Many financial institutions offer home loans at attractive rates and favourable terms. While it’s true that a home loan can help you purchase your dream house, opting for it at the wrong time can hurt your overall finances. So, what’s the right time to take a home loan? Below, we have enlisted certain aspects that can help you determine the right time to apply for a home loan:
- When you have a good and stable monthly income
Home loans are long-term financial commitments as their tenure usually spans over decades. Therefore, to evaluate your repayment capacity, lenders will consider your monthly income. If you have a decent and steady monthly income, you will be able to pay your home loan EMI regularly without straining your finances.
- When you have less or no other financial obligation
Availing a home loan can be financially burdensome if you are already servicing other loans such as a personal loan, business loan, etc. Moreover, it would increase the possibility of a home loan default. Thus, it certainly won’t be the right time to avail a home loan if you are already spending a large portion of your monthly income towards other financial commitments.
To avoid this, you must first pay off your existing debts and minimize your debt-to-income ratio, and then apply for a home loan to purchase your dream house.
- When you have saved for the required down-payment
While you will be able to finance 75-80% of your property purchase through a home loan, you would have to pay the remaining amount as down payment. For instance, if the property’s value is Rs 50 lakhs, then you can get a loan amount of up to Rs 40 lakhs. The remaining amount of Rs 10 lakhs has to be funded by your own sources.
Therefore, the right time to apply for a home loan would be when you have a sufficient amount for down payment. You can consider saving for down payment through Fixed Deposits (FDs), Recurring Deposits (RDs), Mutual Fund Investments, etc. By making a higher down-payment, you can reduce your home loan repayment burden significantly.
- When you find the right property for yourself
The primary reason of availing a home loan is to purchase a property that you like. Therefore, you must apply for a home loan only when you have zeroed in on the right property. Make sure to conduct a quality check of the property, check whether you like the neighbourhood and locality, also note the property’s resale value before making the final call.
Irrespective of whether you’re availing a home loan in your 20s or 40s, ensure that you do not over-borrow and the home loan EMIs are always affordable. Compute your home loan EMI using an online home loan EMI calculator. Make sure to manage your finances efficiently, in order to help you maintain your monthly expenses, help fund you during any unforeseen exigencies, while allowing you to make timely repayment of the home loan amount.
