Buying your first home is both an emotional and financial decision. Whether you are purchasing the home after graduation from college or you recently got married and wish to shift to your new home, here are few ways you can smartly plan your investments:
Planning and investing in a home can be a daunting task, especially for those who are buying a home for the first time. The smart approach of buying a home is to invest some part of the money in fixed deposits and other financial instruments. Banks and financial institutes give loans against FD which is known as a collateral loan. With NBFCs loans, you can gain up to 75% of the loan amount on cumulative FDs with an ROI of 2% more than the existing FD interest rate. So, young investors who are planning to buy a home can take FD and use that money at the time of purchasing a home.
The property price in India is continuously rising and buying a home at such a time can be a huge financial stretch. Most banks give home insurance as “hazard insurance” on mortgage documents, but this insurance only covers basic protection such as theft and fire. Whereas NBFCs provide comprehensive policies that include any losses due to floods, fire, earthquakes and other natural and human-made calamities. Home insurance also covers add-on benefits like loss of rent, liability cover and more. The first step towards planning and investing in your home should include getting home insurance from a trusted financial institution that provides maximum benefits.
After the implementation of GST, i.e., Goods and Service Tax, dynamics of the taxes while buying a property have changed. A single unified tax system has replaced all indirect taxes like VAT, service tax and other taxes. Although the under-construction fees are covered in GST, there are many ready-to-move property taxes that are still present. These taxes are not a part of GST, and it involves charges like registration charge, stamp duty and TDS (Tax Deduction at Source). It is essential to manage these taxes to fulfil the dream of buying a home.
Private Mortgage Insurance (PMI)
Mortgage insurance is becoming increasingly popular in Indian market. It guarantees repayment of the mortgage insurance in unfortunate cases such as disability or death of the policyholder. Banks usually give a tenure of 12 months for this insurance. There are few financial institutes that provide loan against the property to self-employed and salaried individuals. As compared to banks, NBFCs have a flexible tenure of 2 to 20 years, and it allows the borrower to repay the loan conveniently. PMI might seem like unnecessary insurance, but one should always be cautious about adversities in life.
Investment for Down Payment
Once you have purchased a home loan, the saga of payments and EMIs continues. You have to ensure that you have a proper mechanism in place to meet the down payment requirements for your home loan. One of the best ways to achieve it is through a SIP in mutual funds. With SIP, you can invest in a set of mutual funds for a long term that yield constant returns. Moreover, as you diversify your portfolio, you do not have to rely on one mutual fund performing well for your investments. You can build a corpus over the years and use that money to pay for your down payment or even EMIs once the home loan is approved.
Read about Unsecured Loan
Ensuring that you are able to follow these steps effectively assures you of capital available at all points for your home needs. Hence, if you wish to buy a home you can call your own, you must follow the above-mentioned tips to plan your investment accordingly.