The purchase of a property may have a significant bearing on your monthly finances in 2021. We look at ways to deal with these changes smoothly
Following the Coronavirus pandemic, housing ownership became the natural choice for many in 2020. The correction in property prices in many micro-markets, record-low home loan interest rates, stamp duty reductions in several states, and festive offers, encouraged investments in properties in 2020. For those who ushered in 2021 in their new homes, this is just the beginning of a new era, where your financial management skills will be put to the test. We look at how to deal with the expenses of a new house, without much hassle.
Rearrange your monthly expenses
Owning a property involves taking care of it and ensuring that it is supplied with every necessity. Many new expenses will come your way in the form of EMIs, maintenance charges, utility bills, repair costs, upkeep bills, etc. This is precisely why renting has been very popular among millennials. Nevertheless, for new homeowners, the changed fiscal scenario would require you to rearrange your expenses in such a manner that your bills are paid in time, without causing too much strain on your monthly finance.
Go slow on furnishing the new home
While a new home may require a new furniture, fittings, drapes, curtains, lighting, etc., getting all of them in one go might be disastrous financially. Thus, it is necessary to chalk out a detailed plan, to go about the re-modeling gradually. While the first year, your savings could be used to change the furniture, the next year could be used to improve the lighting fixtures. Adjust your old furniture and other things till you have saved enough to make a new purchase.
Keep an eye on interest rate movements
Housing loans are already at record low rates. You could get a home loan at 6.80% annual interest, currently. While the chances of rates going any lower are thin, as the Reserve Bank of India (RBI) is likely to maintain rates at the current level for some time, to tame stubbornly high inflation while also boosting consumer spending, it is a good idea to keep yourself updated with all changes in the world of home finance. Since changes in the repo rate would eventually reflect in your EMI outgo, you must be aware of the changes on this front. Banks will not intimate you about changes in rates. Hence, in your own interest, keep a track of these things.
At this juncture, note that the RBI in its bi-monthly policy review takes a decision to make changes in key lending rates, following which, banks make changes in their respective interest rates.
Avoid taking fresh loans
Lending rates are at record lows. This makes auto loans, home renovation loans, etc., quite affordable. As banks present it, this could be a once-in-a-lifetime opportunity to own a vehicle or to get all those expensive furnishings for your new property. This might certainly tempt you to purchase a new car or go for a complete remodeling of the property right after your home purchase. This would, however, have an adverse bearing on your monthly finances. Overburdening yourself with new loans at this point would amount to poor judgment, as the economic conditions also pose a risk to job security and business safety. It is advisable to sit tight and maintain a wait-and-watch mode, right now.
It is only after a significant portion of your home loan is paid off that you should think of applying for a fresh loan. Having to serve two big loans would be a big burden, otherwise.
Do not opt for too many insurance products
As part of home loans, banks also push you to buy home insurance and home loan insurance policies, primarily prescribing all their arguments in favor of these products, playing on the fear factor. The kind of uncertainties we have seen in recent times may also prompt us to opt for insurance, in order to face any future difficulties in a planned manner. However, one should not lose sight of the fact that taking excessive insurance, makes a huge dent in one’s yearly earnings. Unless you understand the product properly and its intended benefits, do not purchase home insurance and home loan insurance products only because your banks recommend it.
Save up for small repairs and maintenance
With usage, your new property will be subject to normal wear and tear. The paint on the wall will lose its sheen over some years. Grout lines may appear on the floor, despite regular cleaning. You would get a leaky tap or faulty electricity wire. Sometimes you would have to call an exterminator for pest control or a plumber to fix a choked pipe. These would, by and large, be regular occurrences that would not only need immediate handling but also cost you. Keep saving additional money every month. to address such issues in the new property. If left unattended, these issues could significantly impact the property’s health.
A new home also makes it incumbent upon the owner to make certain changes in one’s social life. You may have to significantly cut down the number of movie outings, fancy dinners, and trips to malls, meant for leisure activities. House ownership also means you will be able to throw less number of parties in a year or at least reduce the number of guests invited at each such occasion. Even if you cut the numbers of these celebrations by half in a year, you will be able to save up a significant amount of money, to take care of your new responsibilities as a house owner.
Source – https://housing.com/news/new-year-goals-for-home-owners/
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