5 Points To Consider Before Budgeting Your Investment In Property

The home that you can afford is not what the banks tell you, not what your colleagues with same-pay-as-you buy, and certainly not what is marketed by builders.

There are various things that you should consider before deciding how much can you spend on home-buying. Real estate purchase is a long-term commitment which can go as high as 10-20 years. So, ensure that you make a logical forecast of the large expenses that you might incur for the loan period. A real estate investment must not stifle your spending capability.

Here are the things to consider:

• Check your eligibility limits: Most banks differ in the amounts that they can lend to a person with a certain amount. It is not necessary that you should always go with the bank which agrees to give you the highest loan. Visit several banks and go for an average of the mean of the amounts that they are ready to lend out. After the exercise, it is always wiser to go ahead and get a pre-approval for a loan before you decide on a real estate purchase. It gives you the extra confidence to chase a property and can save a lot of time.
   
• Assess your monthly outgo: A real estate investment always leaves a stress on the finances of people across earning capabilities. Before you go in for an investment, ask yourself how much do you spend per month. Of that, tick the essentials that you will not be able give up. That is probably the amount that you will eventually have to decrease your personal monthly spends to, after an EMI outgo. Make sure you can stick to it for a few months before your loan starts. It brings in financial discipline.
   
• Improve your credit score: Check your credit score with CIBIL or the Credit Information Bureau. If there are any disputes or other issues that you might have ignored in the past, settle it before you take a home loan. As banks increasingly refer to CIBIL scores, there might be some last-minute block in your loan. A clean record is always welcomed by banks and it is crucial to maintain it at all times.  
   
• Channel your savings: If you already have a chunk of savings to spend on real estate, do not use it all up for the upfront payment. Make fixed deposit or recurring deposits for contingencies. It is advisable to keep contingency fund in two different forms of savings across banks, in order to ensure their quick availability. It might be tempting to sweep clean your savings for the investment but leaving some open even at the pain of taking a higher loan is wiser in the long run. Also ensure you that adequate health and other insurance are in place.
   
• Research interest rates: Big and national banks advertise their rates and also market them very well. But that is not necessary the best rates that you can get. Go to regional banks and even co-operative banks and ask the interest rates they offer. You might end up being surprised.

(The writer has been working as a business journalist for the last nine years, and has covered beats across banking, pharma, healthcare, telecom, technology, power, infrastructure, shipping and commodities)