Purchasing a house is one of those emotive calls that makes immense sense pragmatically too. Not only are you able to make your dreams of having your own residence alive and tangible, but that becomes an appreciating asset too.
On that note, before you purchase your house, you need to keep a few things in mind. These happen to be small financial preps that you ought to be ready with, even before you make a concrete decision. You would not want to be one of those who avoid reading fine prints, and then fall into untoward complexities.
Either way, here are a few financial preparations to make before you buy a house.
1. Curtail Household Expenses
Compartmentalisation is something that you most definitely have to master, long before you even seek appropriate property locations. Purchasing a house can be a financial stretch, and if you are living your life lavishly otherwise with a limited influx, things might just get a little complex later on.
For instance, if there is little need for say, a classy piece of décor immediately, you can put it off for later. You need to master the idea of “if it ain’t broke, don’t fix it” before you can proceed to further plans.
Living rather frugally with a limited influx will not only guarantee a safer house purchase, but in the long-run, might leave you with more to spend.
2. Loan Burdens will Overburden…
More often than not, banks may provide you about 4/5th of your property value at the time of purchase as a loan. As stated above, being an appreciating asset has an apparent downside here. There might be obvious T&Cs associated here (which none of us read) that might later prove to be an ache in the back door.
Try not to avail such high loans and debts. Do not bite off more than you can chew, especially when it comes to purchasing a new house. Not only will you be subject to overburdening monetary pressure, but in case you would want to sell it or rent it out, you will face other hindrances too.
3. …. Especially if You Have Loans Pending
The other reason why you (logically) should not seek any debt is if you already have some pending. Oftentimes, it becomes all the more burdensome if you have pending financial calls to deal with. Have a car that needs to be paid off in full? Some folks need their money back? Clear it all up before you even consider accessing a new one in the first place.
Not only will you be more qualified to meet the average bank’s requirements to get a loan (in case you do end up availing it), but also receive a sense of tranquillity that nothing else may be able to provide. Get rid of pending loans before you get a new one instead.
4. Insurance is Key
Insurance is not just a life-saver, in this case, it is a house-salvager. You absolutely need to ensure that this prerequisite is dealt with while you are arranging other financial aspects. In this regard, ask your insurance provider every single question that tangents your mind.
Is home insurance a sensible way to go? What is an insurance deductible? Can I get tax returns and other deductibles? What aspects does homeowner’s insurance cover? These are the absolute basics that you have to cover before you proceed any further.
This becomes important in two aspects. Firstly, you know where your money is going. Since you are making this humongous call to purchase a home, you absolutely have to ensure that there is no monetary leakage.
Secondly, you will get insurance plans that will be custom-made for you. In other words, you will be able to provide premiums and dividends based on your choices and preferences. As the recurring theme goes, ensure to read the fine print.
5. EMI Reserves
The other financial prep that you ought to do is to have enough to pay off 3 months’ due, in case you have sanctioned a loan. This is one of the most quintessential aspects that you ought to cover.
Besides, having reserves is an idea that is rather timeless. Prep for unforeseen circumstances? This is the practical manifestation of it. Ensure that you can cover that long of tenure, or at least have some means to equate it. Just a worst-case measure.
You will obviously need another aspect to deal with—a regular source of income. But then again, since you are on your way to getting great access to the residence of your dreams, we think you have covered that already.
Other than that, the aforementioned preps should be enough. Happy purchasing!