Home » News » Real Estate

Presents

Co-Sponsored by

In Association With

Jan 31, 2013, 05.29 PM IST | Source: Moneycontrol.com

Biggest blunder people make when buying a house

I have seen many examples where the dream house has become a financial nightmare.

Sanjay Matai

Author & Promoter, The Wealth Architects

Expertise : Mutual Funds ,Insurance

More about the Expert...

Budget!

Yes, budget is where most people go wrong when buying a property. I have seen many examples where the dream house has become a financial nightmare.

The first payment that you have to arrange for is the down-payment. Banks will finance at most 80-85% of the property cost. So you have to put in 15-20% money from your pocket. Given the property prices, this amount itself will run into lakhs.

Therefore, how much money you can pull together to pay this up-front amount becomes your first objective. It is not uncommon to see people giving away their last rupee in down-payment or even borrow from other sources. This is a serious issue. Don't overextend yourself. You should not be paying two loans…home loan from banks and loan from other sources.

By the way, recently banks have stopped including stamp duty and registration charges in the property cost. So the entire amount on this account has to come from your pocket.

Monthly EMIs come next. These will typically run for 15-20 years. So don't repeat the mistakes that others made - they considered only their current financial obligations in fixing their borrowing capacity. You must plan your EMIs keeping in mind the future commitments too.

Remember that house is not the only financial obligation in your life. You can't compromise on children's education or medical costs. You can’t sacrifice your other desires such as mobile phones, annual vacations, electronic gadgets, car, etc. for decades.

Hence, don't go overboard with your budget. Make sure that
(a) You have some spare cash AFTER the down-payment and

(b) Your monthly loan payments DO NOT exceed 40-45% of your net take-home pay.

Beware! This is not the end of the story.

You have to account for other costs too.

One such significant expense is the annual property taxes. So before you decide on a property, find out exactly how much will be the hit every year on account of property tax.

Nowadays big societies have become a preferred option for many buyers. They offer security; they offer various facilities such a swimming pool, gym, library, etc; they offer a great ambiance. All this, of course, costs money. And hence the society charges! Make sure you also inquire about the annual maintenance charges before you buy a property.

Then you will have to buy insurance too. This will include

(a) the cost of insuring your loan and

(b) the cost of insuring the house against fire, earthquake etc.

Finally, you have to spend money on furnishing it too. From furniture for your rooms, to kitchen fittings, to ACs/fans, to interior decoration, to soft furnishing, to refrigerator/oven/microwave, to bathroom fittings, to geysers, the list is practically endless.

Account and budget for all this too beforehand itself. It shouldn't so happen that you spend your entire money in buying the house and then find yourself with nothing much to make it livable.

And yes, don't forget the house warming party!

Buying one house in one's lifetime is history. So don't overextend yourself assuming this is your first and last home purchase and hence you should buy the best even if it is beyond your budget. No. As you progress in your profession, you will find it convenient to switch to a bigger and better property. In fact, just as upgrading your gadgets, mobile phones and cars has become common, upgrading your homes too will soon become a normal affair.

Sanjay Matai is a personal finance advisor, author and online financial trainer. There's a lot more free stuff to read on his blog ( thewealtharchitects.blogspot.in ).

ADS BY GOOGLE

Videos

more »

Property rates
  • Residential
  • commercial
Mumbai
Capital Values Rate/Sq ft (INR)
Aajiwali
3000 - 5000
Ambernath
3000 - 5000
Badlapur
1000 - 3000
Bhandup (West)
11000 - 13000
Chembur (East)
15000 - 17000
Chembur (West)
11000 - 14000
Dombivali (East)
4000 - 6000
Ghatkopar
13000 - 15000
Heeranandani Gardens Estate - Powai
25000 - 30000
Hiranandani Gardens Estate - Powai
25000 - 30000
Kalyan (East)
2000 - 4000
Kalyan( West)
3000 - 5000
Karjat
1000 - 3000
Khandala
8000 - 10000
Kharegaon
5000 - 7000
King Circle
17000 - 28000
LBS Marg
12000 - 15000
Lonavala
3000 - 5000
Mulund (East)
11000 - 14000
Mulund (West)
11000 - 14000
Mumbai Nasik Highway
3000 - 6000
Powai
15000 - 17000
Senapati Bhagath Singh Road
3000 - 5000
Sion (East)
18000 - 21000
Sion (West)
17000 - 22000
Tilak Nagar
12000 - 22000
Ulhasnagar
3000 - 5000
Vikhroli
11000 - 14000
4 Bunglows
17000 - 28000
7 Bunglows
13000 - 23000
Chandivali
10000 - 15000
Malad (East)
12000 - 14000
Versova
21000 - 24000
Airoli
4000 - 8000
Belapur
6000 - 9000
Ghansoli
6000 - 8000
Kalamboli
4000 - 9000
Kamothe
4000 - 6000
Nerul
7000 - 10000
Palm Beach Road
12000 - 15000
Panvel
3000 - 6000
Sanpada
8000 - 10000
Sea Woods
8000 - 10000
Ulwe
3000 - 6000
Uran
3000 - 6000
Vashi
9000 - 12000
Altamount Road
62000 - 72000
Breach Candy
62000 - 74000
Chowpathy
48000 - 58000
Colaba
42000 - 46000
Cuffe Parade
67000 - 69000
Dadar(East)
32000 - 34000
Dadar(West)
29000 - 32000
Lower Parel
32000 - 34000
Mahalaxmi
38000 - 40000
Malabar Hills
68000 - 75000
Mumbai Central
23000 - 34000
Napean Sea Road
66000 - 74000
Parel
26000 - 34000
Prabhadevi
37000 - 39000
Tardeo
41000 - 49000
Worli
36000 - 41000
Andheri (West)
18000 - 20000
Andheri(East)
15000 - 17000
Bevarly Park
5000 - 7000
Bhayander (East)
5000 - 6000
Bhayander (West)
3000 - 5000
Boisar
1000 - 3000
Borivali (East)
11000 - 13000
Borivali (West)
10000 - 14000
Dahisar
4000 - 8000
Goregaon (East)
13000 - 17000
Goregaon (West)
12000 - 14000
Kandivali (East)
12000 - 14000
Kandiwali (West)
11000 - 12000
Malad(West)
9000 - 14000
Mira Road
5000 - 7000
Naigaon
1000 - 4000
Nala Sopara (Eastt)
3000 - 5000
Nalasopara (West)
3000 - 5000
Poonam Nagar
6000 - 8000
Shanti Nagar
7000 - 9000
Shrishti
6000 - 9000
Vasai Road
1200 - 4000
Virar
1000 - 3000
Note: Price trend are based on asking rate and not necessarily on the transaction date
Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.