If you have decided to buy your dream home, here is what you can do to take advantage of the current economic environment.
- The realty market is fiercely competitive. With a large number of builders competing with each other to get your attention (and your money), there is a wide range of choices available; not only in terms of property but also price, thus making it a buyer’s market. As a smart buyer you should negotiate and negotiate and then negotiate some more till you get the best deal.
- It is advisable that you choose ready-to-move-in property as it means lower risk for you. Or else you can go in for those builders who have tie-ups with banks. With many builders the tie-up entails 25% down payment and 75% loan from the bank. So, when you make 25% down payment you enter into an agreement with the builder and the bank, and your interest starts only when the flat is ready. In case such tie-ups are not available then only trust those developers who have proven track records of completing and delivering projects in time.
- Given in the current global financial scenario, be prepared to make down payments in the range of 20-25% and not 15-20% (which was the case till recently). In a way higher down payments make banks happy and it also puts you in a better position to negotiate with the lenders. You get better interest rates and therefore pay lower EMIs.
- Go window shopping for lenders, shortlist four or five, and get into negotiation mode. Now the big question is whether to go in for fixed or floating rate. Remember loan interest rate is not a one-time decision; it has to be reviewed periodically say every 6 months. As a new borrower you are advised to opt for a floating interest rate loan because those loans are linked to the bank’s Benchmark Prime Lending Rate (BPLR) and go down when downward revision happens. In the current scenario, floating rates make the best sense as rates are expected to go down in the immediate future.
- Rope in your spouse to get the maximum loan possible. Opt for the longest tenure possible, leaving enough wiggle room in your income to accommodate a hike in the loan rates. This is not likely in the near future but it is always better to be prepared.
- Man knows little of what fate has in store for him. When you take a home loan, it is on the basis and assumption of continuing income. We run into all kinds of risks in our daily life. Accidents and health issues like heart attacks, stroke, paralysis, kidney failure, and other physically crippling ailments can cause loss of income or, in some cases, even your life. Housing loans are a long-term liability. This is why when you take a home loan; it is advisable to take a life insurance and critical illness policy. Life insurance policies provide monetary benefit in case of an unfortunate incident like death and ensure that your family members inherit your home not your home loan. Critical illness policy will take care of the home loan liability if your income gets interrupted due to unforeseen, unavoidable circumstances which such conditions may create. That will be one less thing for you to worry about while you are under severe stress. Best of all, most banks will be happy to finance the one-time premium payable for both policies, enabling you to get this protection at a small addition to your regular EMI.
Protect yourself, protect your home. Insure your home along with the belongings. Every penny is worth spent here; therefore make these expenses part of the cost of buying your home.