A guide for millennials on importance of planning funds for home ownership
The Covid-19 pandemic has shown us that even minor uncertainty can cause us to fall short of our personal, professional, and financial objectives. A catastrophe has the capacity to overturn even the best-laid plans, no matter how sensibly we organize our lives. Aside from increased concerns about cheap medical insurance and healthcare, most people’s primary goals have been to retain financial security. Millennials, for that matter, have lived through a catastrophe as life-altering as the pandemic at a young age.
The pandemic has served as a wake-up call for people who have lost their employment or who have not been able to meet their financial goals this year. It has compelled people to carefully organize their savings and investments in order to protect their future. To keep up with an unstable world, millennials and young professionals are already thinking about developing their financial assets much sooner in their lives.
With more millennials working from home on a regular basis, purchasing a first house or a larger property has become a viable choice. Purchasing a home, on the other hand, is a time-consuming procedure. It necessitates considerable thought, financial discipline, and dedication. As a result, it is recommended to begin saving and preparing early in order to become a home owner at a young age.
There are several compelling reasons to purchase your ideal home in your late twenties or early thirties:
The real estate market has risen stronger as a result of the crisis, with a slew of new offers and plans for first-time home purchasers. Now, more than ever, there are more possibilities for smaller, more inexpensive homes.
The majority of financial institutions and lenders are currently giving house loans at multidecadal low interest rates. These factors, together with some excellent solutions that allow for greater flexibility in loan repayment as well as one’s personal contribution, are making home ownership a less time-consuming and more economical endeavor. Recent stamp duty reductions and tax incentives are two further factors that have made house ownership more appealing in recent years.
Rentals are usually levied at a rate of 2% to 3% of the property value, whereas house loan rates are around 7%. This disparity used to be above 6% until about 2-3 years ago. Renting an apartment is still better than buying in purely mathematical terms if the property appreciates less than 5% per year on average. However, if establishing roots is a top goal and resale value isn’t the most crucial factor, this is the finest moment to buy in more than two decades. Property prices are levelling down, earnings are rising (slowly and steadily), and interest rates are at their lowest levels in India’s history, making now an excellent time to buy.
Some financial institutions have a maximum tenure of 25 years, while others have a maximum tenure of 30 years. The lower the monthly instalment cycle, the longer the term. If you’re a borrower between the ages of 25 and 30, you might want to seek a longer-term loan with lower EMIs to make your purchase more reasonable. The total cost of ownership rises as the loan term lengthens, but this is a trade-off that must be carefully considered.
For individuals wanting to buy a home with the aim of staying for a long time, it’s a good idea to see if there’s a way to start with lower EMIs and gradually increase the amount owed throughout the loan’s term. This enables you to purchase a home that is large enough to meet your future wants while remaining within your current financial means.
In the event of a bank-sponsored subsidy, the overall cost of the home rises in exchange for the benefit of not having to pay EMIs until possession. Do you wish to repay a bigger sum in the long run, even if no EMIs help with early affordability? It’s crucial to strike the correct balance between total cost of ownership and monthly withdrawals.
Building a financial asset, such as a home, gives significant protection against future risks while also providing a source of additional income in the form of rent. It not only encourages long-term financial planning, but it also allows young people to spend their money more wisely. As a result, taking stock of one’s savings and investment plans, reading more about improving one’s creditworthiness, and focusing more on becoming financially independent are all good things for millennials to do.