Many people are of the thinking that an individual can start planning to buy their house once they reach a certain stage in their life. However, this is not always true. In today’s times, countless youngsters are seeing the advantages of making one of the biggest investments of their lives, which is buying a dream home. These youngsters apply for home loan plans early on, which helps them clear the loan much sooner.
If the idea of starting early in life sounds appealing, make sure to keep the following points in mind before going ahead and apply for a home loan:
- Maintain a steady financial plan
Being financially disciplined is one of the most important factors that you should keep in mind if you want to buy a house. Even with a housing loan, the down payment would amount to at least 10% of the property value. In order to have funds for the down payment, it is vital to start cost-cutting, stop spending on things that are not needed, clear any existing debts, and push to expand your existing income. Also, note the areas where your funds are being spent. Calculate the funds that are going towards groceries, rent, eating out, shopping, entertainment, and so on. Make a budget based on these expenses and save as much as possible. There are many apps you can download that can help you with financial management every month.
- Get tax benefits
Did you know having a home loan can help in getting tax benefits? The EMIs have two components – principal amount and interest. The principal component in the EMI can be claimed for tax deductions of up to Rs 1.5 lakh in a financial year under Section 80C of the Income Tax Act of 1961. Tax deductions can also be claimed on the interest of the loan under Section 24 up to Rs 2 lakhs in a financial year. This will help you save a significant amount of money.
- Try and invest funds
Setting aside savings from your income is a good habit but this might not fetch you the returns needed. This is why it is advisable to start investing. Try opening a fixed deposit or a recurring deposit, as these are risk-free investments and are not affected by market fluctuations. Investing in mutual funds is comparatively riskier as they depend on market conditions but can fetch better returns. There are lesser financial obligations at a young age, which means taking such risks is a possibility.
Buying a home is always going to be a challenge but getting an early start could make your life easier in the long run. For instance, if you apply for a home loan in your 20s, you could be done with its EMI payments before celebrating your 50th birthday. Make sure to use a home loan EMI calculator to know the EMIs you would have to pay. This will help in following a steady financial plan for successful repayment.