Tips to buy your dream home with a single income
There is a home for every dream…
It isn’t uncommon for home ownership to be equated to achieving a milestone in many cultures. Buying a home is a big deal, but it isn’t everything. That said, people across ages and financial statuses believe their greatest achievement would be buying a home. Though millennials are doing a lot of things differently, they seem to agree with the previous generations on home ownership. However, millennial women are breaking the glass ceiling by owning homes, unlike the previous generation where most homeowners were men. Most millennials are also pushing towards home ownership before their 30s, bringing into play serious questions about buying home on single income.
In countries like India where marriage is considered a necessary social institution, co-ownership is quite common. However, millennials have been changing the scape dramatically, and with it single home ownership is also beginning to rise. A home may be bought on a single income for various reasons. The buyer may not be married, the buyer is confident about buying a home on their income alone, the buyer may want more autonomy on the property, the buying family has a single source of income, or they simply because they want it to be a single income property. Whatever the case, buying a home on a single income may feel daunting and intimidating to some. But with a little financial planning, owning a home with a single income is very much a possibility, even if you are buying your first home. Here are some tips to help you with it.
- Work on your credit profile
When you apply for a home loan, you must make sure to have a good credit profile. Do not make costly purchases (>Rs. 65000) before applying for the loan. At the same time, it wouldn’t be wise to cancel credit cards before loan application as this could shorten your credit age. Reducing your credit limit would be a wise move to make.
- Get an insurance protection plan
In unfortunate events of unemployment, accident, or death, you and your family will need financial protection that could cover your loan. There are short and long term premium plans that offer protection from unexpected events that could lead to non-payment on single income investments.
- Find a guarantor for your loan
A guarantor sign may help you seal the deal with your home loan. Though it is not compulsory that you get a guarantor for a home loan, the third party assurance helps process your loan faster. But before you find a guarantor for your home loan, understand the risks involved. Once a guarantor signs for you, they are liable for your loan payment, and their loan eligibility goes down significantly. In most cases, the guarantor is an immediate family member.
- Save up for your down payment
In India, the government allows for a maximum of 80% loan, meaning you will have to make a 20% downpayment on your home. If you aspire to buying dream home, then it would be wise to start saving early. However, even saving 20% is significant, and isn’t always practical. But, there are other ways to secure a home loan down payment, read on to know more:
- A loan from your employer
A loan from your employer for your down payment is very much possible, and an easy process at that. It is a far easier process to arrange for a down payment from your employer, considering they have the assurance of your salary
One could easily mortgage their gold for instant loans to pay home down payment. With many private institutions willing to pay money for gold, a gold loan is one of the fastest ways to arrange for a down payment
An extension of the gold loan, the home down payment is offered by few institutions. The home down payment loan is offered at 11% interest for a 12-60 months period against gold.
- Pick the perfect EMI plan for you
Now, this is perhaps the most important aspect to consider when you apply for a home loan on a single income. Carefully consider how much you will be able to pay for your home loan every month. Your home loan should ideally be 40% of your net income to run your family smoothly. If you have other sources of income apart from your monthly earnings, then consider increasing your EMI for a shorter loan duration. Also, remember that the ideal tenure of a home loan is considered at 15-20 years.
It would be wise to keep an eye out for changing home loan policies, fluctuation in interest rates, and any government reliefs.
Whether your home receives single or double income shouldn’t be a deciding factor on owning a home. There is a home for every income bracket, provided one educates themselves well on what would be a right fit for them.