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Last updated on 5th January 2024
Your 20s are the decade meant for settling in. Graduating college, obtaining a stable job, and entering adulthood are only some of the milestones you cross in this decade. However, not many people think of getting a home in their 20s, since this seems like a financial feat too tough to achieve so early on in life. Well, we are here to bust this myth and tell you that, with some sound financial planning, you can make this dream come true!
Table of Contents
- Home Buying in Early 20s
Home Buying in Early 20s
With millennials accounting for 34% of the market demand for new housing spaces, India's youth has driven the booming market. The Indian housing market began to improve in 2022 after a period of post-pandemic gloom, with lower interest rates, attractive deals, and government assistance. Millennials are recognizing the value of making a sound property investment and entering the market for homes with zeal.
If you are in your 20s and looking to invest in a home, you might be wondering how to go about it. There is no doubt that purchasing a house is a significant investment, especially for someone in their 20s. Fortunately, here are a few tips to help you as a first-time home buyer.
Suggested read: First-Time Homebuyers
1. Deciding the budget beforehand
The first step to planning for a home is evaluating your current financial situation. Before anything else, you should decide what your budget is. Do you have a maximum budget you are willing to spend on your dream home?
Taking stock of your current, monthly, and yearly expenses and working out how much money can be put aside toward home loan emi every month will help you arrive at an estimate for your budget, and keep you in check to avoid overspending.
2. Saving Money
This may sound obvious, but this step is important. Making a financial commitment as huge as the purchase of property should be done only when you have the money to fund a few months worth of expenses in your account.
Make a plan and stick to it: how much you should be saving every month. Cutting corners and saving extra pennies will help you get financially ready for undertaking big monetary commitments like house-buying.
3. Search for the best possible deal
Now that you know what type of home you’re looking for, it’s time to research mortgage options. Doing thorough research by perusing home loan websites, comparing your options, and weighing the pros and cons of alternatives offered by different lenders will help you choose the loan that is the best fit for you.
It is crucial to negotiate. You should try and negotiate with your chosen lender to bring down the quoted interest rate. Furthermore, you should most definitely negotiate with the seller of the property for a lower price! Negotiating with all the parties involved will ensure that you incur the lowest possible cost on the loan and the property.
4. Take Stock of Additional Expenses
Buying a house is likely to come with several extra expenses along the way, such as repairs, remodels, and installations. Accounting for all of these while deciding the loan amount you wish to borrow is the safest bet. Work out how much the house will cost you in total- including all the unforeseen expenses that are likely to come up, interest payments, and processing fees on the loan.
Most importantly, make sure that the total costs or loan amount falls within the maximum budget you have set for yourself! This will help you manage costs and ensure that you do not end up paying much more than you signed up for.
Suggested read: Millennial Homebuyers
5. Read the fine print
Before you make the final decision to go ahead with the loan, go through the loan agreement carefully. Ensure that you understand all the terms and conditions well. You should check with your lender in case you are confused at any point.
The loan agreement document should be perused carefully as this will govern the terms of the loan going forward. As a borrower, you should ensure that you are alright with the loan and repayment terms you are committing to. You can also opt to have the document notarized or have a witness present while signing.
6. Credit Score
Before applying for a loan, make sure to check your credit score. If you have a robust credit score, you can use it directly as this will help you obtain a hefty loan at a low rate of interest.
Also, as a twentysomething, you may have a limited credit score and might have difficulty obtaining a loan. Talk to a financial advisor to determine the best options for you. If you have a low credit score, you should take measures to improve your score before applying. This will increase your chances of actually getting accepted for the loan, as well as fetch you the loan at a cheaper interest rate.
7. Consider Tax Advantages
Buying property is more than just a purchase; it comes with several advantages of its own. As a first-time home buyer, you are eligible for extra tax benefits of Rs. 50,000/- for interest paid toward home loans. There are several other tax advantages for home buyers in India, and if well planned and executed, you should be able to avail a hefty amount of deduction in your taxes.
8. Get Pre-Approved
When you’re ready to buy, make sure to get pre-approved for a mortgage. This will give you an idea of how much of a loan you qualify for and what kind of payments you’ll be making. Working with a qualified lender makes this process easier.
Investing in real estate is a great way to build wealth and secure your financial future. But, as with any major purchase, it pays to be prepared.
9. Consider your future goals
It’s also important to consider your long-term goals when planning for a home. Buying a home in your twenties can be an investment for the future, but you should also consider how the home will fit into your life in the next 5-10 years. Will you want to have children, switch careers or move? Make sure you’re comfortable with the commitment you’re making.
Planning for a home in your twenties can be daunting, but it’s achievable with patience and knowledge. By evaluating your financial situation, making a plan, researching all mortgage options, taking advantage of tax incentives, and considering your future goals, you’ll be able to make an informed decision and get a jump-start on your homeownership journey.
Published on 1st June 2023