It is no longer that difficult to buy a home in one’s 20s, as impossible as it may seem. It might seem tough as one has just started working and the paychecks are small and it seems difficult to get on with day to day tasks so buying a home seems like out of the question.
It has been seen that high costs of living are a challenge for the Indian youth and it was seen that 39% of the youngsters between the ages of 22 to 27 regarded high costs as the biggest obstacle to the fulfillment of their aspirations. Nevertheless, it is still possible to have a home in the twenties if some things are kept in mind.
Things to keep in mind
The first thing to be kept in mind is that it would take an immense amount of financial discipline from the first day of working life to be able to achieve this dream. It is imperative that all secondary expenses be cut down to the minimum. Most youngsters have a tendency to save after they have made all the expenses and naturally, hardly anything is left over by the end of the month. The healthy practice is to save a certain amount from the salary every month compulsorily and then spend for the necessities from what is left after saving. If that means one has to sacrifice a movie or a night out, then so be it.
As one’s income increases, so should one’s savings, rather than spending that extra income on unnecessary luxuries. It is a good idea to use a recurring deposit and save at least 20% of the income at the start of the month and the money will fetch you around 7% per annum, a figure better than the 4% that a salary account gives. Also, if you have any part time earnings or come into extra money as a gift do not part with it and put in your home buying account. If you are getting married, then have a simple wedding without draining the life savings of the family in it and it will all contribute towards buying a new home.
What else should you set store by?
Moreover, one also needs to keep in mind all the costs of home ownership. The stamp duty and registration has to be accounted for and it is about 7% of the total cost of the house. There will be costs related to paperwork, lawyer’s fee and if you are buying an under construction property, then one also has to pay the GST. In case of affordable housing, it is 1% or else it would be 5%. All of this has to be accounted for when you start saving.
To make this dream possible, it is important to start small. While most of us would want to buy that dream home, it is important to be realistic and not go overboard. The first home can be a small one that will be great just for and your spouse’s needs. Be on the lookout for schemes and offers and make use of the affordable housing scheme. If one makes use of the Pradhan Mantri Awas Yojana, then one can also earn subsidies on the home loan under the Pradhan Mantri Awas Yojana. As one’s income grows, one can save more money from there and sell the old home and with the combined funds, upgrade to a larger home.
Financing and other aspects
If one opts to go for financing, then one also needs to have a good credit history and it is important one has a good credit score. A score above 750 is ideal and to achieve it, you have to be careful about all your payments. Do not delay your credit card payment and fix any red areas in your credit history, in case there are any. In case you are married, then both of you could borrow together and that will also increase your loan eligibility.
Since you are young, you have ample time before you and you could opt for a loan with a long tenure. That would bring down your monthly EMIs and keep the payments manageable. Also, if you get hold of some extra money, you can use it to prepay your loans and bring down the principal amount, and likewise the interest along with it. You will also get tax benefits under Section 80C and Section 24B under a joint home loan.