5 Money Mistakes to Avoid when Buying a House

It won’t be incorrect to state that almost all of us dream of owning a home at some point in our lives. According to Bank Bazaar Aspiration Index 2021, housing (88.2 percent) remains the third-most important goal for all participants; investing in children’s education (91.8 percent) and long-lasting friendship (89.7 percent) being the first two. However, to achieve this goal, at times, people take steps that put extreme pressure on their personal finances. This raises an important question: to what extent should you go to buy a home? If you ask a finance expert, they would suggest that it’s not wise to push your limits to an extent that you disturb your personal finances and jeopardize your financial future. Below, we have compiled a few money mistakes you should avoid when buying your home so that you can make smart investment decisions:

Money Mistakes to Avoid as a Homebuyer

1.Not saving for a down payment

When purchasing a home on loan, you are required to make a down payment of at least 20 percent of the total value of the property. Say, for instance, the property you are buying is worth Rs. 50 lakhs, the lender would expect you to make a down payment of approximately Rs. 10 lakhs. Moreover, there are other non-loan-related expenses that should be considered, such as stamp duty, registration, GST, title deed charges, water supply, electrification, and much more. If you don’t save for the down payment, you may end up depleting your savings or emergency funds or be left with no option but to seek money from family or friends. The ideal practice is to make a systematic long-term investment plan with the help of a finance expert to avoid disturbing your budget.

2.Exhausting all your savings to buy a home

We all usually save up to fulfill some of our short-term and long-term financial goals. Naturally, it’s totally okay to use your hard-earned savings for buying a home, particularly for the down payment or other major expenses like interior design and registration. However, it’s not the best idea to exhaust all of your savings or disturb contingency reserves like an emergency or retirement fund for making the down payment as taking such a step can risk your personal finances, as well as long-term investment plans.

3.Not evaluating the state of your personal finances

A lot of people rush into making investments, including something as major as real estate, without completely comprehending their personal finances. And when it comes to property, you can’t afford to overlook additional costs such as furnishing, monthly living expenditure, home insurance, property tax, painting, and maintenance among other things. Making a list of these expenses is essential to determine whether or not you can afford a particular property. If all seems well with your finances, you can approach a bank for a loan. But before you do that, ensure you clear out your credit history and maintain a decent credit score so that your application does not get rejected.

4.Not checking multiple lenders to get a home loan

After months to years of research, when you finally find the property of your dreams within your budget, you are likely to rush to grab the deal. But in this process, you may not give much importance to checking with multiple lenders for a home loan and quickly settle for the one that’s offered by the first bank. But some of the factors that differ include the interest rate, longer loan tenure, low cost of borrowing, low penalty rate, better prepayment rates, quick processing time, and flexible loan eligibility norms. So, by not checking the terms of the lenders, you are setting yourself up for an expensive deal.

5.Compromising future financial security and other goals

While buying a property is undoubtedly the best investment option, it’s not the only financial goal you have to fulfill throughout your life. Many people invest in a house and spend most of their income on repaying their home loan, without giving due consideration to savings or their long-term investment plan. Eventually, such people struggle to arrange funds for other important things like a child’s education, healthcare, and retirement. So, make sure you don’t make this mistake and buy a house that fits within your budget.

Once you have decided to take the big leap and do what it takes to buy your house, the process may seem scary and nerve-wracking. However, it doesn’t have to be that way. The key is having a finance expert guiding you, along with a trusted real estate agent. Look no further than Dezerv!