Purchasing a house for you and your family is perhaps one of life’s most important financial milestones. It is a big investment, and you need to answer many questions to make the right decisions. Should you buy or build the house? Which area of the city is suitable? What’s your budget? You need to consider many different aspects before making the decision.
Here are a few tips to create a responsible financial plan for owning a house.
1. Create a budget and stick to it
Buying a house may be the most expensive investment you make. As a result, you may want to ensure that you get the best possible property available. Additional facilities like a gym, clubhouse, and swimming pools are attractive options. But they can also increase the overall cost of the property. If these options seem unnecessary, it is better to avoid them.
The first step in buying a home is to identify a realistic price range based on your current financial situation. After that, you should look for the best properties available in this price range.
2. Increase your savings
To fulfill a major financial goal like purchasing a house, you must create a long-term financial plan. And for this, you may have to change a few spending habits without compromising your current lifestyle.
Identify your monthly income, expenses, and savings. How much of your income is used for impulsive/unnecessary costs? By curbing these expenses, you can maximize your savings. You can also consider finding additional earning sources to boost your overall income.
3. Invest appropriately
Increasing your savings is important, but to reach your goal of owning a house in the fastest and most comfortable manner, you need to invest your money. This allows your money to grow at a quicker rate. A savings account, for example, offers modest returns of 3-4% per annum. In comparison, you can earn between 10-15% (sometimes even higher) per annum when you invest in equity mutual funds. This can help you save a much larger amount in a lesser period.
4. Be financially prepared for the down payment
Buying a house through a home loan is probably the most viable option for most people. But even when you take a home loan, a down payment must be made. This is generally around 20% of the total cost. You can save this amount by investing in mutual funds through Systematic Investment Plans (SIPs). For example, by investing Rs 5,000 per month in a SIP, you can earn a corpus of Rs 38 lakh in 20 years, assuming you make a standard return of 10% per annum.
Conclusion
Purchasing a house is a major life goal. That’s why it is very important to make the process as well-planned as possible. Through proper financial planning, it is possible to make your dream of owning a house a reality! There are a lot of different aspects to consider.
