By Rohit Kothare on Nov 5, 2018 2:44:00 PM
Not owning a home often tends to challenge the status quo for many, but owning one in your twenties would never cease to amaze you on how surprised people would be when they get to know the same.
1. Decide Where You Want to Live
Think Long Term. A lot of times you want to purchase a house where probably everyone aspires to be. However having spend couple of years away from home makes most of us realise we have learnt what we want and where we want.
So maybe you’re one of those who want to put down some official ‘roots’ for investing in future at their hometown. A few quick points to consider:
- Job Proximity
- Quality of life
- Cost of the neighbourhood surroundings etc.
- Ask yourself: ‘How long do I plan on staying in this home?’ and invest wisely.
Nonetheless, speaking of Pune, Homes in Hinjewadi have seen a focal point lately in Real Estate Pune market. The price value of Projects in Hinjewadi is reasonably fetching due to the presence of IT hub like Rajiv Gandhi Infotech Park as well as close proximity with industrial area like Somatane Phata and Sus.
Then again a good connectivity with Mumbai-Bangalore National Highway & Mumbai Pune Expressway provides it a reasonable amount of projection for being a buyable location.
2. Aggressively Save for 6 to 12 Months
This one’s an important one. It’s time to trim down your expenses. The bigger the down payment you pay the easier it is to get a home loan from your bank and smaller the payback amount on the loan would be. Make sure you have a financial cushion for unexpected costs like closing costs, the PMIs (if applicable), HOA fees, taxes and insurance etc. A few Quick points to consider here are:
- Learn Better Spending Habits - Prepare for a lot of guilt while shopping ...You will get really good at math.
- Cut down your luxuries
- Try and stick to Only home cooked meals
- Stop partying, etc.
- Prefer walking when you can instead of taking a fuel consuming vehicle.
3. Build Your Credit Score
This goes in addition to the previous point i.e. aggressively saving for 6-12 months. This part you should finish months before home-buying season. Having a good CIBIL score is really essential.
If you own a Credit Card and haven’t finished your due payments, it is a serious concern. The lenders can catch you and cancel your loan if you’re indebted to any of the credit card companies.
Related Post - What is CIBIL score & is it possible to buy a home if your CIBIL score is low?
4. Research and Leverage Down Payment Assistance.
There is a possibility of 0% down payment depending upon the schemes available in your area for the first time home buyers.
You can take personal loan for the 10-20% down payment with interest rates ranging between 13-16% and the remaining 80-90% as per Home loan interest rates.
This however will increase your annual interest payment by 60,000-70,000 INR. So paying a down payment will always save you the extra interest payment.
5. Don't Buy a Home that You Know You Can't Afford.
A lot of times your parent’s relatives friends will suggest you to buy a space which is more than what you require, but when you enter a 1000 sq ft house after staying in a studio apartment, all you can think of is, “what am I going to do with all that space?!”. Also considering the question, “How long am I going to stay in this house?” will also help channelize your decision here.
Not only it saves you a hassle of maintenance of a bigger house, but it saves you much more money for your personal expenditure for living life king size. Have you ever used an online loan calculator?
There are several great ones on the web, but the problem with them is that they usually don't include HOA fees, PMI fees, taxes, and insurance.
The best recommendation for a pocket friendly investment in Pune would be projects in Hinjewadi. Homes in Hinjewadi are best priced properties at the moment, because, in most of other parts of Pune and other cities, after all of the fees, your actual monthly home payment could be quite more.
Related Post - Checklist for Buying a Home in Hinjewadi
Not only will there be extra costs in your monthly loan payment, but there are several fees associated with buying the home, including the cost of inspection. Once you are a homeowner, you are hit with even more costs that you wouldn't have had to deal with if you were renting.
If you are ready to buy a home in your 20s then go for it. Just make sure your loan payment is well within your monthly budget. Remember, almost any house can be turned into your dream home with a little elbow grease and vision, so don't let a move-in ready home blow your budget.
6. Get a Roomie
If you are smart and don't decide on marrying yet, you should definitely opt for renting your house with a roomy to cut down your payments.
7. Experience Tax Benefits
Consider a new construction home. New homes (for instance Homes in Hinjawadi) need much less maintenance and should not need any major improvements for years to come.
Projects in Hinjewadi are being made which are more energy-efficient and save on your energy costs. Plus, many builders offer help with closing costs and have different financing options with their preferred lenders. But there are other benefits too. Your homeowner’s insurance could be cheaper as well.
e.g. Deduction for First-Time Home Buyers in 2013-14 This is a special exemption for first-time home buyers whose loans were sanctioned in 2013- 14 (April 2013-March 2014). The government had allowed a special deduction of up to Rs 1 lakh on interest paid on loans not exceeding Rs 25 lakh taken to buy a house worth less than Rs 40 lakh.
The deduction was allowed in 2013-14. If for some reason one could not avail of the full deduction in that year, one can claim the rest of the amount in 2014-15. For example, in 2013-14, if the interest paid and deduction claimed under this provision was Rs 60,000, the rest Rs 40,000 can be claimed in the current financial year.
Section 80C: Deduction for principal repayment on home loan
Under this section, a home loan borrower can avail deduction of Rs. 1,50,000, in a financial year, from his / her taxable income for payment towards home loan principal repayment.
The deduction can also be availed for registration fees, stamp duty and any other specified payment for purchase/construction of residential house property. The maximum deduction that can be availed in a financial year is Rs. 1,50,000.
Section 24: Deduction for interest repayment on home loan
Under this section, a home loan borrower can avail a deduction from taxable income for interest paid on the home loan. The deduction amount in a financial year can be the actual interest paid or Rs. 2,00,000, whichever is lower. The house should have been acquired or construction completed within five years from the end of the financial year in which the home loan was taken.
For interest paid for the period before the house acquisition or completion of construction, the deduction can be availed separately after the acquisition of the house or completion of construction. This deduction can be availed in equal instalments (20% in each year) over five financial years.
Apart from Section 80C and Section 24 (home loan), you can save tax by availing exemptions and deductions under various sections of the Income Tax Act like:
1) Section 80E: Deduction on interest on loan for higher education
2) Section 80CCD: Deduction for contribution towards National Pension Scheme (NPS)
3) Section 80D: Deduction for premium paid towards health insurance
4) Section 80TTA: Deduction for interest on deposits in savings account
5) Section 10(13A): Exemption for House Rent Allowance (HRA)
6) Section 10(5): Exemption for Leave Travel Allowance (LTA)
7) Section 16 (ia): Standard Deduction
Related Post - How to Save Tax on Real Estate Investment?
Deduction on Premium for Credit Protection Insurance
It is likely that at the time of loan disbursal the bank coaxed you into buying credit insurance. In this cover, the insurer pays the outstanding loan in case of your death. It is a single-premium scheme available for loans to buy a house, a car or finance a child's higher education.
The premium is eligible for deduction under Section 80C. Since these schemes are treated as single-premium, the total premium paid can be deducted in the year it is paid, says Mohit Rochlani, chief marketing officer, IndiaFirst Life Insurance.
Credit protection insurance covers the outstanding loan, which decreases with time. So, the sum assured also keeps reducing with time. You can choose the term of the cover.
Deduction on Rent Paid in Absence of HRA
What if your salary does not have an HRA component or you are self employed? Are you not eligible for deduction on rent if you do not own a house in the place where you work? In such a case, you may claim deduction up to Rs 24,000 every year (Rs 2,000 a month).
Section 80 GG says that an individual can claim the least of the following three as deduction: Rent paid in excess of 10% of the total income;
2) 25% of total income; or 3) Rs 2,000 a month.
8. Use Birthdays and Christmas for Useful Gifts
A practical gift is something which actually helps. So why not grab the opportunity of our birthdays and Christmas to ask our near and dear ones to help us with payment towards the house loan?
Owning a home is a big commitment, but if you tackle it with a mature approach you will be on your way to successfully owning your own home. You have just made one of the biggest decisions of your life, but remember, don't panic. You have probably got 30 years to pay off the money, so relax and remember that this is now your home.