Frequently Asked Questions -FAQ
Am I Ready to Be a Homeowner?
Taking the leap from renting to owning is an important milestone in many people’s lives. Not only does it signify that your financial affairs are in order, but it also means you’re finally ready to settle down (at least, for the time being!) Of course, while owning a home comes with a myriad of benefits, there are still several drawbacks to consider, including the fact that homeowners are now strapped with one very big financial responsibility.
Is Renting or Buying Better?
Yes Renting is Better than buying. Buying a house is 4X as expensive in India than renting a space. On an average, home loans have 8.5% interest rate vs 2% rental yield. This differential is highest in India compared to most major economies. Money saved through renting can get you much better returns. But Renting generally gives a feeling of lower liability. In metro cities you can rent a house worth Rs 50 lakh for only Rs 10,000-15,000 a month. At the same time, if you buy a home at the same cost, you have to shell out anywhere from Rs 30,000 – 40,000 as an EMI (equated monthly installment).
What Is the Lender's Formula in India?
Example: If you have availed a loan of Rs. 10 Lakh from a lending institution at an interest rate of 10.50% for a tenure of 10 years or 120 months,the formula determines that the EMIs payable is Rs 13,493. Of this, our calculator can even help you decode that the total amount repayable after the term ends is Rs 16,19,220.
What Do I Look for in Homes?
It is a dream of many to own a comfortable home, here are some things a buyer needs to know before purchasing a house. Budget, Location, Rental rates in the area,Good Resale Value, Stamp Duty & Registration Fee, Additional Costs & Property insurance
Do I Need a Home Warranty ?
In India, every product has a warranty except real estate. However, now even homes will include a service contract which will significantly benefit both buyers and sellers. From buyers’ perspective, home warranty will act as a buffer and ensure peace of mind. Right from the day of possession, the builder will be responsible for all aforementioned problems and will financially safeguard the buyer.
From sellers’ viewpoint, the warranty will boost confidence in buyers and thereby result in higher sales. As quality of the project has been always a major concern for prospective homebuyers, the move will largely benefit the sellers as potential investors and end-users anxious of the structural defects will now pursue their investments.
What Should I Expect at Closing?
You’ll also receive some important documents the day of your closing. At closing, the seller will sign documents that transfer the property ownership to you. You will receive documents pertaining to your mortgage agreement and property ownership. You’ll also have to pay closing costs and make escrow payments.
What Is Pre-approval?
A Pre-approval is where the mortgage pro reviews your credit, your income and your assets, and conditionally offers you a particular mortgage (or several), putting that offer in writing in letter form.
Can you afford the home loan EMI?
It might sound a no-brainer, but many home buyers get this wrong and bite off more than they can chew. The home loan EMI should be around 40% of your net household income. But that is if you don’t have other loans. A high EMI outgo can put your household budget under pressure. If the home loan EMI accounts for more than 50% of the net household income, other goals will have to be downsized or junked altogether. Banks have their own methods of calculating your affordability.
Have you factored in the other costs ?
Like many other products, a house also has ancillary costs that need to be paid for. The price advertised in the media is usually the base price of the property. The add-ons are usually kept hidden till you sit down with your cheque book. Many builders will slip in charges for facilities that you thought were free with the property. Others will keep certain charges hidden from the buyer by tucking them away in the fine print. Some charges, like the preferential location surcharge or the gym membership fee, are kosher, but others are not. There have been cases where builders have been dragged to court for charging extra for parking.
Planning to buy a house, but feeling unsure?
Before you take the plunge, just calculate the home loan EMI you will have to pay every month. If you take a loan of Rs 50 lakh at 10% for 20 years, the EMI works out to Rs 48,250. Now start putting away that amount in a short-term debt fund or recurring deposit. In 10-12 months you will figure out whether you can really afford the EMI. If you find it difficult to put away that amount every month, imagine your situation if you had actually bought the house. On the other hand, if you don’t feel the pinch and all other goals have also been taken care of, go ahead and buy. In 12 months, you would have saved around Rs 6 lakh, which means a bigger down payment. There are some fringe benefits as well: if you are putting away a big chunk into savings every month, it will prevent you from wasteful expenditure. This strategy won’t work where asset prices are going up rapidly.