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Funding your Home with a Home-loan

Home buying is often a one-time and lifetime commitment. It is one of the most significant investments and transactions that we enter into during the course of our adult life. Home buying transactions can have repercussions for the next 20 years of our life and therefore must be executed with care and diligence.

Most individuals buy a home with a home loan as it is one of the easiest methods to home ownership. However, one must be careful while considering, evaluating and opting for a home loan. A careful study of the interest regime, payment terms, pre-closure terms and overall conditions of securing a loan a highly important.

Prior to taking a home loan one must ascertain his/her current and future earning capacity. While banks will carry out a due diligence of your income before granting the loan it is important from a personal standpoint to understand the implications of taking a loan. The monthly EMI is something that you will end up servicing for the next 15-20 years – in which scenario you must factor in the future earnings as well as possible future costs.

If you are opting for a floating interest rate loan, then there is definitely a possibility of the interest rate (and with it the EMIs) going upwards – a scenario that could throw your monthly budget out of gear.

One must also consider the down payment that has to go into the purchase prior to securing the loan. While attaining the loan might be easy, it is not always easy to put together the money required for making the down payment – this might delay your plans of buying a home.

A home loan places constraints on future spending capacity! While income will grow at a slower pace the continued burden of servicing the home loan might provide to be challenging.

All this however, does not mean that buying a home with a loan is ill-advisable. On the contrary a well planned purchase with appropriate thought and preparedness could be one of the best decisions you will make in life. Like most decisions, it should be based on sound financial thinking and appropriate preparedness. This ensures you are fully aware of what you’re getting into and you can make provisions for contingencies if any.

Buy securing a place you take away a huge burden away from the future and giving yourself security for the rest of the years ahead!

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