In India, home ownership is a cherished goal. As per the 2022 Aspiration Index survey, a home of one’s own was among the top aspirations of young India. The survey measures India’s aspirations through the lens of personal finance. According to the study, home buying is the fourth biggest aspiration and most important wealth goal.
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With property prices skyrocketing and home loan interest rates gradually rising, it becomes challenging to take a big financial decision like buying a home. Potential home buyers often wonder about the right time to buy a house. Your decision to buy a home would depend on several factors, including your affordability, real estate prices, location and loan servicing capability.
While there are no set rules to decide if this is the appropriate time to buy a property, you can use these pointers’ help. Take a look:
1. Low pricing trend: There are cycles in the real estate market when the valuation of properties either are low or stable for a period. Such phases should be a great time to buy a home at affordable rates.
2. Interest rate: After touching historical lows of less than 7 per cent, there has been a rise in interest rates in recent months. But compared with what it used to be a few years back, the prevailing home loan interest rate hovering around 8.5 per cent is still a good time to buy a home. Additionally, given the stubborn inflation and the likelihood of further rate tightening by the central bank, it is a good idea to lock into a property deal while rates are comparatively low. A higher interest rate means higher EMIs and tenures. Thus it is advisable to seal the deal with low interest rates.
3. Adequate liquidity in hand: A home loan is a great help financing your dream home. However, you must know that the lender will fully fund your house. You will have to shell out a percentage (usually 20-30 per cent) of your property value as a down payment to purchase a home. You should consider buying a home when you have adequate liquidity to pay as a down payment.
4. Good credit score: A good credit score helps you get the best interest rate deal. You should build and maintain a credit score of at least 750 points before starting your home-buying process. The higher the CIBIL score, the more your bargaining power with your lender. Even a 25 basis point difference in interest rate will accrue considerable savings during the repayment period. Thus, when your creditworthiness is higher, it could be a good time to take a loan for home buying.
5. Better cash flow management: A strong cash flow management, often neglected by many or unnoticed as something to give attention to, is of great help when servicing a loan. If you know you can manage the current and future cash flows, it’s time to book your dream home.
6. Liabilities under check: If your current ongoing financial liabilities are under check and are manageable even after adding home loan EMI, it’s time to go for home buying. It’s worth reminding that EMIs for home loans are also a sizable chunk of money. To honour it regularly, tremendous control over expenses while maintaining a healthy cash flow is indispensable. Meanwhile, it is also prudent to settle the existing loan liabilities sooner than later while avoiding adding fresh ones.
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Finally
While the above-discussed factors may help you decide if it is the best time to buy a home, it may only be possible for some of them to fall in place at one time. Moreover, it would help if you did not wait for that, or your home buying may be a never meeting dream. The most important factor in a home purchase is your financial readiness to make the up-front payment and to be able to repay your EMIs on time. You’re well-placed to buy a home if you’re in this position. Factors like interest rates and pricing trends have a lesser impact on your readiness.
