Buying a home in the early twenties might seem like a daunting idea but actually it is not. Yes, this is the time when most people are just starting out on their careers and there are many other concerns at this point, like settling down and meeting the expenses of the family in the future, and paying for children’s education. The income at this time is not often steady but having a house brings its own share of security, which is why, it is a good investment to make. Hence, if you are planning to buy a home in your early twenties, here are some of the things you can do to accumulate that corpus.
Be disciplined in matters of finance:
It is true that this is the time in one’s life when one has the tendency to splurge and finally be able to live the lifestyle that one has always wanted but if you have a bigger goal of buying a property then you have to forego many secondary and unnecessary expenses. You have to budget your expenses each month and that will include cutting expenses like partying and spending on gadgets just because they look cool. You have to make sure that your savings are more than your expenses and apart from the necessary ones like paying rent for your current accommodation, meals and medical expenses, almost everything else have to be cut down on, especially those which will not yield any returns in future. Indulge yourself only occasionally and you will understand the value of these sacrifices when you finally walk into your new home.
Yes, everyone has a dream house in mind but a luxury residence in the heart of the city could be very expensive and might not be within your budget, unless of course, you have a huge pay scale. Otherwise, it is better to start small- so instead of waiting to buy a spacious 3 BHK in the prime area of the city at first, settle for a cozy 2 BHK in a developing area. You will still have the security of your own home and by the time you have reached your thirties or your forties, your property in the developing area would have undergone appreciation. So, combined with the amount you get from the sale of your old home and with the savings you have acquired in the next ten years, you will be in a better position to upgrade to your dream home finally. Or else, you will just have to keep on paying rent for a home which will never be yours and drain your resources when you can use the same money to pay your EMIs for a small home at first, which will yield greater returns in the future.
The down payment is the amount you pay from your pocket while signing the agreement of the house and even after you have made the purchase, there are other costs to deal with like paying the GST- in case of an under construction property- and then for stamp duty and registration. Yes, you do have the option of getting a home loan but the higher the principal amount, the greater will be the interest you will have to pay on it. Banks finance only about 80% of the property but ideally you should be able to lay down at least 40% from your own pocket. So start doing your research early and choose properties which will fit the calculations.
Do not waste extra income:
From time to time, it is quite possible that you will enjoy some extra income- like a bonus from your employer, a wedding gift or a sudden maturity benefit from a fixed deposit that you parents might have started for you when you were young. Try not to waste a dime of these additional incomes and put it in your account for your home and utilize it to build your corpus. Put it in an FD and lock it again till you are ready to buy the home in a couple of years.
Build a Strong Credit History:
As mentioned earlier, you will have to approach the bank for your home financing and you have to deal with the monthly EMIs post the house purchase. Before you approach the banks, make sure you have a good credit history. A score of 750 and above is considered strong and will give you leverage while bargaining with financiers to bring down the interest rate. Make all your other payments on time, from phone bills to electricity bills, and never go overboard with your credit card usage. Clear the monthly payments on time because bankers prefer to finance individuals who show signs of repayment money on time.
Opt for a Longer Tenure:
Since you are buying a home early in life, you have the advantage of age on your side. Hence, go for a longer tenure to repay your loan. Repaying Rs 30 lakhs will seem like a stretch but doing so 30 years will make it more comfortable. Yes, you might have to pay more in terms of interest but you can always make part pre- payment and bring down the principal amount as your income increases with age.
If you are meticulous with your financial planning, you will be able to acquire a home in your early twenties quite smoothly.