Financing Home Ownership: Here’s How to Go About It

When Aditya and Rupali decided to purchase their dream home, they were quite confused. The newly married couple didn’t know how to get started with homeownership and finance their first big purchase. “We were thoroughly confused about the entire exercise. We didn’t know how to start and didn’t want to rush,” says Aditya.

They are not alone. Many of us are not sure about going ahead with homeownership and financing. The article aims to simplify the concept so you can get started. Let’s begin.

Also Read: Home Loan: All You Need to Know – Godrej Capital

What is Home Ownership?

Before delving deep, let’s first understand what homeownership is. Simply put, it’s to own your home. When you buy a home and register it, you are its legal owner. Homeownership involves a considerable investment of time and money, and therefore, you must meticulously plan the entire exercise. To begin, you must first:

Plan, Decide the Home You Want to Buy and Get Started Early

The first pre-requisite is to zero in on the home you wish to purchase. The Indian real estate market has evolved considerably over the years, and buyers today have more options than before.

So, first, decide on the type of home you wish to buy - apartment, villa, bungalow, farmhouse, etc. Once you have chosen the type of home you want to buy, the next step is to accumulate the necessary funds to make the downpayment. Start early to have more time to acquire the desired money.

Get the Necessary Funds for the Downpayment

Downpayment is a crucial aspect of home financing and ownership, as no lender will fund the entire value of your home. Most lenders offer 80 to 90% of the home’s purchase price as a loan, while you have to pay the rest as a downpayment. So, for example, if the home’s purchase price is INR 1 crore, the maximum loan amount you can get is INR 80 to 90 lakh.

You need to pay the remaining INR 10 to 20 lakh as a downpayment. You can accumulate funds for the same in several ways, such as investing in a fixed deposit or starting a systematic investment plan (SIP) in a mutual fund.

As said, the earlier you start, the more time you have in your hands to collect the amount required for the downpayment. Especially with SIPs in mutual funds, the power of compounding can help you quickly accumulate the desired funds.

However, if you are finding it difficult to arrange funds for the downpayment, find out if the lender has the option of parallel funding. Prominent lenders such as Godrej Housing Finance offer this facility whereby the downpayment amount is split into smaller amounts. You can make the payment as per the construction stage, and this eases the burden of making a large upfront payment.

Bridge the Shortfall with a Home Loan

Note that most homes in India are financed through loans. As a buyer who needs home financing, you should choose a lender offering the best home loan rates and flexibility. Equally essential is to select a credible lender who offers quick disbursal with minimal documentation.

Look out for better flexibility in terms of repayment and help you design your EMIs in a manner that ensures you don’t end up stretching your finances. For instance, Godrej Housing Finance offers you flexibility in repayments and helps you design your EMIs so that you can pay them with ease.

Today, almost all lenders spell out home loan eligibility and other information, such as interest rates, on their websites. Compare different offerings and choose the one that best suits your needs. Note that a good credit score can help you get housing finance at a better rate of interest.

Also, before you opt for a home loan, have a repayment plan in place to make sure you pay your EMIs on time. It is advisable to opt for lenders offering loans on flexible repayment terms to avoid becoming a burden in the future.

Also Read: Maximising Tax Benefits: Navigating the World of Joint Home Loan Ownership

Why is Home Ownership Important?

Home ownership offers financial stability, long-term investment benefits, and a sense of security. Additionally, it offers a sense of belonging and helps you build equity. The home buying process may seem complex, but understanding the cost of home ownership and following first-time home owner tips can make it easier.

Benefits of Home Ownership

It is financially and emotionally rewarding to own a home since it helps people build equity with time. Additionally, the cost of home ownership can often be more predictable than renting. Moreover, homeowners enjoy greater creative freedom to personalize their living space.

As part of the steps to buying a house, purchasing a home offers potential tax benefits and a sense of accomplishment. In addition, when you get to verify home ownership, it secures your legal rights, safeguarding your valuable investment for the future.

Tips and Tricks

• Understanding the process of buying a house is crucial for a smooth journey.
• Always verify home ownership documents to avoid legal disputes.
• Budget carefully to manage the cost of home ownership, including maintenance and taxes.
• One of the key benefits of home ownership is long-term financial stability. Consider consulting a financial expert and exploring different financing options to secure the best deal.
• Stay informed and plan wisely for a successful home-buying experience.

The Bottom Line

Buying a house is important in every sense of the word – be it emotionally or financially. From selecting the right home to securing funds for the downpayment and choosing the best home loan, every step plays a crucial role.

Engaging in intelligent financial planning includes keeping track of investments and comparing loans from different lenders is essential. Partnering with a credible lender offering flexible repayment options can ease the burden. By staying informed and planning wisely, you can turn your dream of owning a home into reality.

Apply for a home loan and materialize your dreams of buying a home today itself!

Moreover, if you’re struggling with managing your EMIs and accurately calculating them, an EMI calculator can be a useful option for you.

FAQs

Q.1. How much home loan can be availed for a salary of 70,000?

A. With a salary of INR 70,000, you can typically get a home loan of INR 30 lakh to INR 45 lakh. However, the exact amount you can get depends on several other factors. These include your credit score, the lender’s terms, your own outstanding financial obligations, etc.

Q.2. How does housing finance work?

A. The borrower must repay the sanctioned amount over a specified tenure at an agreed interest rate, with the purchased property as collateral. Financial support makes real estate purchases more feasible.

Q.3. How to get a home loan easily?

A. To get a home loan easily, you can ensure you have the required documents, maintain a good credit score, and choose a lender that processes applications quickly.

Q.4. What are the financial benefits of home ownership?

A. Homeownership helps build equity over time, offers potential tax benefits, and provides more predictable costs compared to renting. It’s a long-term investment that can be appreciated in value.

Q.5. How can first-time home buyers simplify the home buying process?

A. Understanding the cost of home ownership, following first-time home buyer tips, and verifying home ownership details can make the process smoother and more manageable.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially.
The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements.
Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com