Ah, the thirties! By this time, most people would be getting ready to settle down and start a family, if not already, start working towards life goals etc. A phase when they seriously begin to think of savings and investments.
Buying a house is a quintessential dream most foster, even before they start to earn. It’s like a fairy tale ending (or beginning?) – living in a house which you bought/built with your own money. Your tiny personal space in this big world. In this article, we will discuss about investment plans you can adopt as a 30+ year old to save for a future home.
Ideally, it is better to start saving towards buying a home as early as possible, preferably from your first job itself. However, not many manage to sort out their finances and savings as early as 20s. It is a stage when people tend to be impulsive rather than intuitive. Lack of proper guidance and role models, but no dearth of real estate ads and promotions! So, if you are one of those who has saved diligently towards the down payment – congratulations and well done! If not, 30s is still a good time to start when you have a large investment horizon.
Purchasing a home is a big investment. Even the down payment can go in lakhs, followed by hefty and long-term EMIs. 30s is when you career graph begins to pick up and you reach a higher salary-point. You have the qualifications and the experience. After all the hikes and promotions you have earned and opportunities you have snagged, you are in a position to make an impression and expect higher packages. You are not as addicted to social media as before either. So, this is the right time to prioritize major life goals like buying a home.
‘I don’t have enough to save now’ phase is something every youngster goes through – especially when their salary is meagre. Whether you choose to park your money in a mutual fund or an Fixed Deposits, it is important to go on a frugal-mode and stick to it – invest a specific portion every month. Big dreams come at a price. Curtailing your expenses by distinguishing need from want is one way to define that.
Keep a mix of low-risk investment instruments like debt schemes and riskier plans like ELSS at varying maturity periods. Reinvest short-term plans as they mature. Continue until you make enough for the down payment. Choose schemes that will fetch you a whopping corpus (investment and gains) by the end of 5 years. It can cover the down payment. In the meantime, don’t forget to ensure that you and your family have adequate insurance coverage.
SIP (ELSS) and PPF are two schemes that give you the The power of compounding works its magic only on some investments like. It means that you earned interest on the principal as well as the interest on the same – at the end of every compounding period. This means that the more compounding periods you have, the more you earn.
Would you stop taking care of your teeth after winning a Best Smile Award? Similarly, investment is a habit for life. Consistency is the only way to make it so. Many a month you may feel like skipping due to some reason. Signing up for an SIP can inculcate financial discipline in you. However, you cannot stop once you feel that you have saved enough.
Banks are super enthusiastic about giving loans to young professionals. They check numerous factors like age, qualification, credit history and future earning potential among others, before sanctioning loans. So, the younger you are, better your chances of availing a house loan.
Assuming that the retirement age is 60, you will still have a good number of earning years to pay off home loan EMIs. By opting for a longer loan tenure like 15-20 years, your burden of monthly EMI will be lesser. However, the interest will be more in the long run.
Government has always encouraged people to invest in their younger years to secure their retirement years. Section 80C of the Income Tax Act allows you to claim up to Rs. 1.5 lakhs as exemption on Principal part of the EMI you pay every year. Aside from that, you can also claim Rs. 50,000 on interest part of the EMI.
Ironically, unless you borrow, you won’t have a credit history or credit score. Having a good credit score is important because it shows that you can be trusted to repay the loans on time. Having a credit score of at least 700 and above is considered good for home loan seekers.
Property prices will continue to skyrocket and sooner you buy, the lesser money you will spend. Even if you choose to dispose it later, you can easily make a good profit.
No doubt, it is a matter of pride if you can manage to own a house at a young age. At a time when many of your peers (even those earning more than you) live in rented houses. That you have already started securing yours and your loved ones’ future. Feel free to feel proud.
The first thing to do is to make up your mind that this is your number one life goal among others. It helps to steer clear from distractions and have clarity. Then, the next thing to do is to zero in on a location. Do you see yourself living a good number of years there? Start researching the real estate market trends in the country and your city.
We are talking about a big ticket investment here. Most builders demand 10-20% down payment. So, your eye should be on schemes that can fetch you that kind of amount. This is an age when you can afford to take risks aggressively. So, consider something like ELSS with potential to earn you close to double returns than safe but low-return schemes.
In today’s times, it is quite rare to see people who live within their income. Many rely on the likes of credit cards and payday loans to get by, and some might have education loans. It will be difficult to get a housing loan if the banks think that you are credit hungry. So, clean up your debt chart as much as you can before you seek a home loan.
A higher credit score will not only get you your home loan approved quickly, but will also fetch you a good deal like reduced interest rates. You can actually try and negotiate with your loan manager to allow some rebate in the interest on the basis of your credit score.
Bank requires documents like your ID proof, residential proof and income proofs along with PAN and ITR statements. Don’t forget to keep at least 4-6 passport size photos for the same. These days you can do the paperwork online or have the loan agent come to your office or home to do it. If you wait to collect all these after applying, it will lose precious time.
Most banks have online eligibility calculators on their websites. You can use them to find out the maximum amount you can avail for various tenures based on your current income and age. This will help you make an informed decision.
Cost of housing don’t stop at down payment and EMIs. You also need to plan for property registration and stamp duty expenses. Not to mention doing the interiors, regular maintenance and yearly property taxes. It is amazing that you have decided to start working towards a solid investment and a life goal in the form of a home. Like we said, earlier the better. If you are wondering which scheme(s) to choose, you can go for ClearTax Invest.
With handpicked plans selected from the top fund houses in India, your goals can be met seamlessly by choosing one of our long-term goal-oriented plan. We have schemes designed in such a way that they cater to people from diverse income backgrounds and varying risk appetites. So, quit procrastinating and start investing.