If one has to draw a parallel to a home loan, marriage comes pretty close. There is a high involvement of finances, emotions and a long time commitment. But don't let this analogy send your thought trail in a frenzy! Just like marriage, this can turn out to be the best decision of your life.
There is always a noise of opinions surrounding hyped topics. Home loans is one such example. Everybody has their own views on picking the right lender, tenure, interest rates, etc. What has proved to be the ideal home loan for somebody, need not be the one that works for you. The right fit for one's lifestyle, finances, capacity to repay, has to be arrived at after a detailed analysis. So what are the factors to be considered before you take the home loan leap? Read on to know more.
1. Are you ready for a long time commitment?
At least a decade long, if not more. Since EMI's will not leave your side for the years to come, this recurring expense must be provisioned for.
Evaluate the current sources of income and their efficiency in fulfilling the EMI commitment. Now, consider how these sources will contribute a couple of years from now. Also, focus on making investments right now, the returns of which will contribute to EMI payments in the future.
2. Have you considered the expenses to follow?
Gaurav and Rita have been planning to invest in a house since last year. They took a stock of all their resources including savings, loan from family etc. Made their choice of house and went in for the home loan. Their liquidity was now restricted and cash flows tight. Rita now wanted to furnish the house and do it up according to their taste.
She found an interior designer who understood her requirement completely. An action plan was made and budgets were discussed. Rita and Gaurav were now stressed due to shortage of funds and their unfulfilled dream. Should they go in for an additional loan?
Well, needless to say that will only add to their stress. Hence, it is important to access what matters most to you and factor in those expenses before making a loan application.
3. Will this decision support other major responsibilities?
Homes are only a part of the dream. Each one of us has various responsibilities to fulfill, in order to live a satisfied and happy life. These are linked to our loved ones, healthcare, education, marriage, etc.
These are large and important expenses. We need to consider these factors and estimate the amount required and the time available before incurring these expenses, to provision for them.
It is important that planning for this is in place before planning for any additional loans.
4. Is it an 'attractive offer'?
It is not hard to find loan offers which appear lucrative to potential customers. The loan market is very competitive and doing this definitely helps the lenders' product to stand out. However, prudent borrowers will dig deeper and not allow their decisions to be driven by the enticing numbers on the home loan advertisements.
If something appears too good to be true then most definitely that will be the case. Question the numbers and offers which vary largely from market offerings. Go in for the offer only after you know about all the associated charges and caveats.
5. Is your decision backed by research and consulting?
Often our decisions are influenced by the experiences of people around us or they come from our own past experiences. It is only natural to operate from a zone of comfort. And there is nothing wrong in that. However, it is important to look at things from a fresh perspective in these competitive and dynamic times.
Only because three of your friends have chosen a particular lender, you choosing the same one, should not be a reason enough. Nor should the only reason be, an existing long relationship with a lender.
Speak to the experts and evaluate the offer you have against the ones available in the market. Research can reveal facts which will enable you to make the right choice or at least negotiate better. Doing the homework pays off.
The above guidelines will definitely help in making the deciding process easier, the repayment process smoother and you happier.
Smart planning and the discipline to implement will take away the burden and stress associated with home loans. So go ahead and take the leap. Not only with faith but with knowledge, research and planning. The dream home will be yours soon. We wish you joy and prosperity!
Illustration: Uttam Ghosh/Rediff.com
The author is Co-founder and Director Credit Vidya.
