Financing Home Ownership: Here’s How to Go About It

When Aditya and Rupali decided to purchase their dream home, they were quite confused. The newly married couple didn’t know how to get started with homeownership and finance their first big purchase. “We were thoroughly confused about the entire exercise. We didn’t know how to start and didn’t want to rush,” says Aditya.

They are not alone. Many of us are not sure about going ahead with homeownership and financing. The article aims to simplify the concept for you to get started. Let’s begin.

What is Home Ownership?

Before delving deep, let’s first understand what is homeownership? Simply put, it’s to own your home. When you buy a home and register it, you are its legal owner. Homeownership involves a considerable investment of time and money, and therefore you must meticulously plan the entire exercise. To begin, you must first:

Plan, Decide the Home You Want to Buy and Get Started Early

The first pre-requisite is to zero in on the home you wish to purchase. The Indian real estate market has evolved considerably over the years and buyers today have more options than before.

So, first, decide on the type of home you wish to buy - apartment, villa, bungalow, farmhouse, etc. Once you have chosen the type of home you want to buy, the next step is to accumulate the necessary funds for making the downpayment. Start early to have more time to acquire the desired money.

Get the Necessary Funds for the Downpayment

Downpayment is a crucial aspect of home financing and ownership as no lender will fund the entire value of your home. Most lenders offer 80 to 90% of the home’s purchase price as a loan, while you have to pay the rest as a downpayment. So, for example, if the home’s purchase price is Rs. 1 crore, the maximum loan amount you can get is Rs. 80 to 90 lakhs.

You need to pay the remaining Rs. 10 to 20 lakhs as a downpayment. You can accumulate funds for the same in several ways, such as investing in a fixed deposit or starting a systematic investment plan (SIP) in a mutual fund.

As said, the earlier you start, the more time you have in your hands to collect the amount required for the downpayment. Especially with SIPs in mutual funds, the power of compounding can help you quickly accumulate the desired funds.

However, if you are finding it difficult to arrange funds for the downpayment, find out if the lender has the option of parallel funding. Prominent lenders such as Godrej Housing Finance offer this facility whereby the downpayment amount is split into smaller amounts. You can make the payment as per the construction stage, and this eases the burden of making a large upfront payment.

Bridge the Shortfall with a Home Loan

Note that most homes in India are financed through loans. As a buyer who needs home financing, you should choose a lender offering the best home loan rates along with flexibility. Equally essential is to select a credible lender who offers quick disbursal with minimal documentation.

Look out for better flexibility in terms of repayment and help you design your EMIs in a manner that ensures you don’t end up stretching your finances. For instance, Godrej Housing Finance offers you flexibility in repayments and helps you design your EMIs in a manner so that you can pay them with ease.

Today, almost all lenders spell home loan eligibility and other information such as interest rates on their websites. Compare different offerings and choose the one that best suits your needs. Note that a good credit score can help you get housing finance at a better rate of interest.

Also, before you opt for a home loan, have a repayment plan in place to make sure you pay your EMIs on time. It is advisable to opt for lenders offering loans on flexible repayment terms to avoid becoming a burden in the future.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially.
The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements.
Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com