Buying a home is one of the crucial milestones in your life. It not only has sentiments attached to it, but also makes financial sense. These days, young professionals who gain financial stability early on in life, are thinking about various investment options. Property is a good choice as you are adding an asset and at the same time planning a viable long-term investment. Due to the appreciation in the real estate prices in the past two decades, investment in home is a good option. Home loan is a preferred financing choice for buying a residential property.
Another viewpoint in favour of home loans is that, if you stay in rented accommodation, you end up spending a huge chunk of your earnings in a lifetime. The rise in real estate prices may scare you from taking Home Loans at any given point, but if you defer your plan to purchase a home through Home Loans now, you may face more financial strain later on. It is best to avail a Home Loan when you are young.
Let us look at how does planning young, help you when you apply for Home Loan.
Advantages of Buying a Home at a Young Age
- Higher tenure with lower EMI
When you apply for Home Loan early in your life you tend to start saving earlier. The lenders calculate the tenure backwards from your retirement age. Considering the retirement age to be 60 years, if a 40 year old applicant applies for Saraswat Bank Home Loan he can avail a maximum tenure of 20 years.When you opt for longer tenure of loans the EMI will be lower. Lower EMI helps in cushioning other monthly expenses. When you begin at a young age say 25, then you can easily expect to get a decent tenure of 20-25 years.
- Less financial obligations
When you go from one life stage to another the cost of living also rises. The lifestyle changes usually demand higher spends. When you are young the responsibilities of spouse, education of the children, dependency of parents or elder family members, etc. are not there. You are at ease to apply for Home Loan, in absence of such financial obligations.
- Investment Potential
If you apply for Home Loan at a young age you have higher loan eligibility. One of the key considerations for the lenders is the future increment in the salary of the borrower. The probability of hike in salary for an applicant who is in his 20s or 30s is much more, than an applicant in his 40s.
- Tax Exemptions
If you avail a Home Loan from any reputed financial institution like Mahindra Finance Home Loans, you are eligible to get tax exemption against the interest paid.
If you are staying at the property for which the Home Loan has been taken then you can get a maximum tax deduction against the interest paid for Rs.1.5 lakhs. However, if you have rented out the property then there is no such cap on the tax deduction against the interest paid on the Home Loan.
Under the section 80C of the income tax guidelines, you will also be eligible for the tax deduction against the principal amount repaid. Basically your tax savings would also advocate purchase of your property by applying through a Home Loan. The young India must see it as a double advantage, by taking a Home Loan you save on your tax and build an asset for yourself in the process.
- Fixed Asset
If you apply for a Home Loan at a young age, you do not have to pay rising rentals every year. You are well aware of the escalation in real estate prices in last few years. In fact you can adjust your EMIs to be same as the rent you were planning to pay. This way instead of paying rent and not building any asset; you have actually chosen to pay EMIs and also build a fixed asset for yourself.
- Perceived Low risk
Financial institutions perceive the young professionals in their 20s and 30s to be low risk applicants. There are many reasons to believe so,
- They have a stable income.
- They possess relatively sound health.
- They have a long working life ahead
Planning Aspects Young Buyers Should Keep In Mind
At the advent of festive season the salesmen and brokers try to lure young professionals to apply for Home Loans. They offer discounts and freebies which can be tempting and misleading for the young minds. Hence it is imperative that you see through such gimmicks and take a decision based on mere facts.
Some of the planning aspects young buyers should keep in mind when applying for Home Loan are as discussed below:
- Surplus Funds
You must have some surplus money to be able to pay for the down payment. The lending institutions like Mahindra Finance Home loan provide the loan for 75% of the total value of the property. You must have sufficient funds to be able to do the balance payments, which will include the fees and charges for procuring the Home Loan, besides the down payment.
- Unique set of conditions
Your situation in life, responsibilities, circumstances, and dependency of family members are different from others. Hence, you are the best to decide, the right time for you to Apply for Home Loan keeping the future liabilities in mind. The decision is yours, whether you have the capacity to bear the debt and what is your current equity.
- Choice of investment
When you are buying a home at a young age you have the choice of investing in under construction properties. As you are young and single you can easily wait for a few years for getting the possession of the property. When you invest in such properties there is lesser burden of installment as each successive slab takes some time to get completed.
- Credit Score
There are many certified institutions in India CIBIL, CRIF, Experian, and others which provide credit rating to individual buyers in India. This credit score is decided on the basis of many things like usage of your credit card, repayment of previous loans taken, etc. The score is measured on a scale of 300 to 900. For you to have higher chances of Home Loan approval, you must have a score of more than 700.
You must collect the information about every step in the Home Loan application process. This will prevent you from miscalculating the finances. You must go through all the terms and conditions mentioned in the Home Loan document. You should pay extra attention to what is written in fine print in those documents. It will help you to take a well informed and calculated decision on when and how to apply for a Home Loan.