Saturday, 18 July 2015


You should review your home loan, or your decision to buy a property versus renting it. Here are two tools which can help you with your decision-making.
While there are several dos and don'ts around financial decisions to keep an eye out for, here are two realty opportunities that people should look at.
1. Think long and hard whether in this market you want to commit to buying a property, as rentals are typically, at less than 3% of the property value in most cities. People moving to a new city and knowing they are going to be there only for a few years, should rent. Calculate whether you should buy or rent a property on the basis of your income and prevailing prices.

On the other hand, if you can land a good purchase price and see yourself living in this property for the next 7-10 years, then 2015 might be a great year to buy a home.. But be warned, it could take around 8-10 years too, for this property to appreciate meaningfully, at the current property rates. Since buying a home is an emotional decision as much as a financial one, a one-size fits all solution doesn't exist. We recommend that you try this Rent versus Buy Calculator to find out what works for you.

2. Ever since the RBI has mandated that pre-payment fees on mortgage loans cannot be levied by banks, switching your home loan has become an attractive option. Hence refinancing (transferring your loan) could help you in three ways:
- Reduce your EMI outflows in these inflationary times. This might just be the boost you needed, especially if your salary hike is less than expected.
- Keep your EMI the same even if you get a lower interest rate. This way, the lower rate translates into lower overall interest payments and higher savings.
- You can also increase the EMI but for a shorter loan tenure. This also leads to money being saved over the long term, if not immediately. Click this Refinance Tool to see which option suits you best.

If it's an under-construction property you are considering, then check if the per square foot rate is low enough for you, to be able to absorb a delay in possession. As is often the case, builders delay delivery of their projects. You need to account for this delay, when judging whether the price you are getting is still worth it, even with a 1-2 year delay built-in to your budget.
Since this decisions is going to take a lot of money out of your wallet, your basic diligence is a must. Look for builders with good street credentials and whose (reliable) reputation precedes them. 
While the realty sector is swamped with unsold inventory around the country, (and construction firms routinely complain about how sops are not being offered by the government to buyers), the fact is that this sector loads a lot of margin, over and above its actual costs. So watching out for yourself and not getting fleeced - either by banks or realty firms - should be your motto.

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