Buying Early Makes Repayment Easier
Till around the beginning of this calendar year
, a question on every homebuyer's mind was 'is the economy out of the slowdown?' Now there is no doubt that the economy is on the growth path, and many homebuyers have bought the home they were looking for. A major issue after the 2008 slowdown, especially for the salaried segment, was job security and the ability to sustain EMI payments consistently. It is now clear that better days are here to stay, and those in jobs are secure.
A home loan is in many cases a 'lifelong' commitment. It stretches through the bulk of the earning years and needs to be serviced consistently. This is the most crucial aspect of
buying a home. yet, it can be comfortable with some careful planning and prudent decisions. Planning and managing loan repayments, investments and monthly household expenses adeptly is the key to financial security.
The question then is 'when is the best time to buy a home?'
There are two aspects of financial management unique to conditions here that hold the key. The first is the fact that no matter when you go in for
a home loan , you are likely to go through some variations and interest rate cycles. Therefore, it is not possible to time your loan for best effect. The second is the need to set aside a good post-retirement corpus.
Interest rate cycles
Inflation holds the key to the monetary policy adopted by the central bank. The inflationary forces have led to tightening in the monetary policy in the recent times. It is therefore difficult to predict the rate movements in the medium term.
A home loan will surely stretch over a long term and therefore is prone to interest rate cycles. What is significant here is the averaging out in the interest rate over the term of the loan.
Also, there are a host of packages and schemes that make it possible for many to plan a loan in anticipation of expected growth in income. With some planning a homebuyer can choose a scheme that helps him through a home purchase comfortably, keeping in mind his needs of cash flows, and expected income streams.
Tracking developments on the inflation front and keeping a finger on the pulse of the economy in general can help
home loan borrowers choose the option that works best in the given conditions. Planning expenses and building a contingency fund alongside will tide borrowers through the high interest rate phases.
Time for savings
There is always the need to save for the post-retirement years. It is ideal to begin as early as possible. Insurance and pension schemes are less expensive and yield more returns when subscribed to at an early age. The monthly outflow to invest in these investment products at an early age is lower as compared to what it will cost if subscribed to in the middle age.
At the same time, it helps to be debt-free as early as possible as other savings options can be planned. An investment portfolio is always more flexible when the weight of EMIs is no longer on it. Also, the risk appetite increases as the loan outstanding decreases. Completing your loan repayment early leaves you with more time to invest and get better returns later in life.
Cost of home
In this background, you also need to factor in the escalating cost of buying a home. Real estate is an asset that always appreciates over time. While price corrections have happened in the past, the demand-supply equation will push prices up again, considering the growing urban population. So, it is advantageous to go in for that home earlier, at a lower price point.
Early mover
Advantage
Finally, it is always better to move early given the investment value of a property. Any property, especially around the city, will escalate in price as and when infrastructure and commercial development gathers momentum in the vicinity. Those who plan to sell and move out at a later date will find the property was a good investment. In the years ahead, concepts such as reverse mortgage will catch on as in the West. Then, a property is a valued investment that will yield returns when most needed. It is therefore a smart move to own a home as soon as possible in life.
Courtesy:-Times Property 02-10-2010
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