Come the financial year end and it's time to plan finances again. Tax-saving investments, insurance policies, and major purchases planned in the coming financial year have to be budgeted for.
In most cases, a home is the most significant investment made in a lifetime - both in terms of value as an investment and asset for a lifetime.
Therefore, whether as an investor or end user, you need to put in considerable planning and thought while acquiring a home. And the best time to begin planning is now.
Here are three major factors prospective home-buyers need to consider:
Budget for Home Loan:
(1.) A home loan takes away a significant portion of one's disposable income every month over a long period. Most go in for a long-term home loan, and this means setting aside a sizable portion of the monthly income towards the EMIs.
(2.) While this seems like a fixed monthly cost, it is in fact a saving. The funds diverted towards a home loan every month should be looked at as an investment that pays rich dividends in the long term. Few asset classes yield the sort of returns property does. A prospective home-loan borrower should arrive at the maximum amount he can possibly set aside towards the EMIs. This will shorten the tenure of the home loan and bring down its interest cost.
Plan Tax:
(1.) Tax-saving investment avenues are critical. If chosen well, these instruments help earn higher returns given their tax benefits. This is the right time to evaluate an investment portfolio to ensure it is tax-efficient.
(2.) Many instruments may not be yielding the returns expected of them because of the tax impact on their earnings.
(3.) A prospective home-buyer needs to ensure optimum returns from his investment portfolio, with the EMIs taking away nearly 40% of his monthly income. Money saved is money earned. Investments like fixed deposits and insurance policies that are to mature in the course of the next financial year need to be tracked. The funds realized from them should be invested in the most efficient avenues available now.
Short-term Plans:
While conventionally, it is always advisable to think long-term while investing, especially in equity, some short-term options like a recurring deposit scheme are a good idea now.
Quick Byte: A prospective home-loan borrower should arrive at the maximum amount he can possibly set aside towards the EMIs. This will shorten the tenure of the home loan and bring down its interest cost.
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