How to buy a home in your 20s…
Buying a home early in one’s career, has several advantages. We offer a list of dos and don’ts for young home seekers, to realise their dream of owning their own home
Owning a home is a dream for many and being able to buy a home early in one’s career, can give you lots of joy. Experts point out that very few youngsters take the plunge into this big purchase, as the entire process is often challenging and complex. Although it may seem like a challenging task, if the process is managed smartly, the benefits are worth it.
“A house is one of the most expensive investments, as compared to other purchases. Hence, buying such an appreciating asset early, helps in correctly setting one’s financial goals. Earlier the investment, higher the opportunity to reinvest and multiply your returns,”
Benefits of buying a home in the 20s
For a millennial, buying a home is an investment in the financial future, says Rajat Johar, head of residential services, India, CBRE, who explains some of the advantages of buying a home in the 20s:
Future investment: It allows youngsters to invest in their future, as it provides them with an asset that can be sold, when they are ready to move on.
Youngsters tend to learn better spending habits: It changes the young buyer’s decision-making process, as they learn how to save and spend money in the most effective and efficient manner.
Tax benefits: As home buyers get tax credits, youngsters can use it for lowering their tax liability. “Also, owning a house is a huge responsibility, which can make youngsters more responsible” he says.
Planning aspects that a buyer in his/her 20s should keep in mind
Planning the budget for a home, is more important than evaluating the maximum loan eligibility. For a first home purchase, set aside a budget that is affordable and in-line with your career growth and pay scale. Ensure that you have savings of up to 20-25 per cent of the value of the house, prior to purchase, while the rest could be from a home loan. Maintain sufficient balance in your savings, for emergencies and other investments like marriage, family, vacations, further education, vehicle, etc.
While most banks provide loans of up to 85 per cent of the property value, youngsters need to first check the EMI that they would be comfortable paying each month.
Sunil Sharma, VP – marketing and CRM, Mahindra Lifespace Developers Ltd, offers some suggestions for property buyers in their 20s:
Loan planning: Consult at least two to three reputed banking institutions, to understand the nuances of the home loan process, including documentation, interest, repayment terms, tenure implications, EMIs, etc.
Project location and connectivity: Work hours tend to be longer at an early career stage and thus, connectivity to core the business districts is important.
Social infrastructure: Nearby retail, dining and entertainment options must be considered, given the fact that youngsters give significant importance to recreation avenues.
Clear titles and other documentation: A younger buyer may need extra guidance on the various legal aspects of a property, such as land titles, statutory approvals, RERA compliance, etc. A consultant or expert can help evaluate the feasibility of a project in this context.
Inculcate financial discipline, by prioritising savings and asset building and you can end up becoming a smart real estate owner. If you get it right the first time, there is a good chance you will know the pitfalls during future investments.
Why buying a home in the 20s is a wise decision
- Longer loan-tenure eligibility.
- More tax saving, due to income tax deduction benefit available against home loan interest and principal repayment.
- Risk appetite is higher, for which the rewards can be better.
- A youngster has more time, to balance other financial objectives.