We all aspire to have a home of our own. There is also no denying the fact buying a house has one of the biggest financial and emotional implications in our lives. There’s always the right time to buy a house. For each one of us, the “right time” varies. Often, we are swayed by what the real estate market offers us – the apartment coming up for sale in our building, a friend who wants to buy a retirement property elsewhere, the fancy new apartment complex we notice on the way to work every day. It’s easy to believe that we need to buy a house immediately. But, instead of looking at what the market has to offer, we must shift our focus to understand what we have to provide for ourselves and our family.
Home loans have made it easier to purchase a house. While this is a blessing when it’s the right time, it can be a burden at the wrong time. Imagine you were shelling out a large home loan EMI at a time when you were thinking of replacing your old car, saving up for your child’s education, and thinking of early retirement. The home loan would forcibly take priority, as it is a contract with no easy exits. More importantly, you may never want to sell the property you bought and even if you did, you might find it hard to get the right price. Quite noticeably, this is not a decision that can be easily reversed. If you choose to reduce your EMI so that you have more breathing room, you end up extending your home loan. This could leave you with the feeling that you’ve spent most of your productive working years paying back that one loan.
For many families, their children’s education is more important than servicing a home loan. Younger working couples prefer to enjoy a more luxurious lifestyle or travel to exotic locations. So, each goal needs to be prioritized and a decision on buying a house should be contingent upon the level of priority. Financial Planning can help identify your needs and priorities. It can also help in evaluating options to find what works best. Through financial planning, you may even be able to shift your focus towards building wealth through liquid assets. Career growth may boost this even further, enabling us to purchase a dream house without it becoming a burden.
When you take a home loan, the total EMIs (including all liabilities such as car loan, credit card dues, education loan, personal loans, etc.) should not be more than 20% of the household income. A home loan should never be a constraint in one’s financial decisions.
When we carefully think through the commitments and stakes involved, we might find a solution that doesn’t compromise on making our dreams real.