A property purchase is among the biggest financial decisions you will make in your lifetime. There are several factors to consider before you take this step. You can fund your property purchase in two ways: either save money and use it to buy the home or take a home loan and have the property funded by a lender.
Is a home loan still necessary if you have enough money to cover the property purchase in full? A common topic of discussion among property buyers. It is much better to buy a house upfront with your extra money than to borrow money and repaying it for years along with its interest rates?
Even if you have enough cash to buy a home outright, you still have several benefits of taking a home loan. In this article we will look at a few reasons why you should take out a loan instead of using your savvied money to buy the property.
A lock-in of funds is not allowed In order to buy a house, you must lock in a considerable amount of money. It’s better to apply for a kotak home loan, even if you have all the money to buy the house, and have it funded. When you can afford to, instead of making a lump sum payment to buy the property, it’s better to make a large down payment and pay off the rest of the amount in higher monthly EMIs. In this way, you don’t have to worry about long repayments and high interest rates, and your house is still financed by a loan with your own funds to spare.
A home loan can be used for other types of investments rather than putting all the eggs in one basket. You are likely to get a better return on your investment if you invest in stocks, bonds, or mutual funds rather than investing all your savings in real estate. Diversifying your portfolio allows you to get better returns.
Having money on hand for unforeseen financial events You must always keep some money in savings – whether you pay for a house with your savings or get a home loan – for financial emergencies. It is possible for such emergencies to occur without warning. Losing your job, receiving medical treatment, and others can severely affect your cash flow. Instead of putting all your money into a property, build an emergency fund.
Make retirement savings Saving up your entire life for the purchase of your dream home is your life’s work. Do you think it would be wise to spend your entire life savings on the property now? As you get older, it is important to set aside some money for your retirement. When you spend all your savings on a property purchase, how will you manage your daily expenses? A person’s biggest strength turns out to be the money in their hand when they are old enough. Get a home loan and pay in small instalments instead of paying it all at once.
You will have the opportunity to look at better properties You will generally need to stick to your budget when you plan to pay for the property with your savings. Therefore, you will likely have to compromise on some features of your dream house. You are limited by the amount of money in hand when it comes to purchasing a home. However, if you decide to take out a mortgage, you can use the in-hand money to pay for the down payment and have the freedom to go over-budget and consider looking at better property options.
You eliminate your cash in hand when you buy a property, which means you are left with no money to meet an emergency. Due to the financial crunch, you’ll have to reduce your dining out, vacations, and other luxuries. You can use any Home Loan EMI Calculator to pick a home loan plan that you can comfortably repay without compromising on lifestyle.