Guidelines to manage finances to buy a home

Investing in a property requires specific period of planning and saving to avoid being end up into problems. Factors such as inflation, higher interest rates and higher property prices make it quite difficult for a person to invest in any property. In such a situation, seeking a home loan will be a huge financial burden and to avoid this the borrower should have a safety net in place.

How to plan a safer property investment?

Have an optimum loan amount:

Before seeking a home loan, you should decide about how much you should borrow. For this, consider the number of dependents, other debts, additional sources of income, expenditure level and interest rates. However, the lenders are well aware that the loan borrowers cannot spend more than 40% of their income towards a home loan repayment. Ensure that home loan amount you take should also tally the additional costs like stamp duty and other legal fee. Always remember that borrowing less results in lesser monthly financial commitments towards a home loan.

Consider the factor in rate increase:

A borrower should be aware about the floating loan rates as they can fluctuate in either directions. A drop in the floating rate can ease you of your monthly savings and a hike in the floating rate can lead to more financial outgo. However, the factor in rate increases while calculating the loan repayments.

Build a definite fund:

It is advisable that one should have 3-6 months of salary in one’s cash reserve. Failing to maintain a contingency amount before seeking a home loan can result in a difficult situation in the event of an unexpected expenses.

Get a protection plan in order:

The home insurance plans provide cover to the home loan in case of any unforeseen incident. In such a situation, the loan borrower will have an insurance cover to pay for the outstanding loan amount without being burdened through EMIs.