Home Loan- 'don't try to bite more than you can chew'

Everyone likes hearing people say "Wow, what a beautiful house you have!" From cave dwelling, we have evolved and now a house provides far more than just shelter...it has also become a source of pride.

Buying a home requires large capital and good planning as when you decide to purchase a house you do not feel like compromising on anything but your resources are limited. Now with the various home loan schemes available in the market, you need not get disheartened as home loans can make the dream of an own house turn into reality. Today the new home purchase loan is easily available and is very cheaper as compared to what was available earlier.

These may look like the most sensible of loans. The interest rates are low and you get tax benefits as well. For those who get occupation of the house, it saves the rent too. The big caution against this loan is that - 'don't try to bite more than you can chew'.

The house you buy should not be more than 3 times your annual income. For example, if your annual salary is Rs. 15 lakhs, chances are that you bring around Rs. 90,000 home, per month. If you buy a house worth Rs. 45 lakhs, you'll have a pay an EMI of around Rs. 30,000 per month (assuming 20% down payment and 10% interest). Now that could be a too much EMI for most of us but you could probably manage. However, if you decide to buy a Rs. 70 lakhs house, an EMI of Rs. 55 K would surely make you pay through the nose. The ones who regret the most are the borrowers, who have not received the occupation of the flats (still under construction). They get squeezed on both sides by EMIs and rent.

The second warning against buying a house is that does not assume that house prices always go up. We, Indians, have been raised and fed on this notion that house prices always go up. The whole world knows that it's not true, especially after the 2007-08 housing crisis of US which shook up the whole world. Many people argue that as Indian city grow at hyper speeds, the demand for housing would only grow. Well, no one is arguing that. But one must realize that it does not mean that price of the house you bought, would also go up, from where it already is. We would conclude by saying, that if can afford it, buy a house and live in it, by all means. But if you can't afford it, but pin your hopes on the prices going up, you are taking a big fat risk here.