8 Things to Look at Before Buying a Home in a Metro City

Posted on: Jan 3, 2024 | 3 mins | Written by: HDFC ERGO Team

8 Things to Look at Before Buying a Home in a Metro City

8 Things to Check before buying home in Metro City

Having a place of your own that you can call a home is one of the top aspirations for a lot of Indians. And is reflected in the number of houses being sold even in metro cities. There has been a constant demand for new houses in all the major metros. If you have moved to a metro city and are considering to buy new home, there are a few things that you must keep in your mind. Clarity on some of these parameters will help you assess the property and your needs better.

Here is a list of all these parameters that you must consider while buying a house in any of the metro cities in the country. Considering that the opportunity to buy a new home does not come every other day, a bit of planning will help you pick the right house at the right price point.

Debt-To-Income Ratio

It is a simple ratio that lenders look at before offering you a new loan. Debt-to-income ratio essentially pegs all your debts to the gross monthly income. For example, if you have a car loan of Rs. 20,000 per month and a personal loan of Rs. 5,000 per month and draw a salary of Rs. 1 lakh per month, your debt-to-income ratio is 25%. As a rule of thumb, lenders look at a ratio of 43% per cent or lower. Ideally, 36% DTI is favourable. You can easily calculate your DTI using the above.

Duration of Stay

It is no secret that houses cost a fair amount of money these days. And if you are not planning to stay in the house for long enough, it might not be a sensible decision. According to experts, if you want to stay for less than 5 years at a house, renting a place is a more feasible option. if you want to buy new home, it should always be with a long-term horizon in mind. Similarly, if you do not plan to stay in the house for at least 5 years, owning a house might not be the most prudent decision.

Job Security

Job security plays a crucial role in the process of buying a home for yourself and your loved ones. Job security essentially means that there is a steady source of income and you will receive paychecks at regular intervals. You can utilise the funds to pay the loan amount. A steady source means that a buyer has a higher capability of repaying the loan. Individuals who have a steady and regular source of income will find it a bit easier to buy a house and maintain the payments.

Down Payment

When you decide to buy new home, there are two major components that you will have to deal with. Primarily, you will need to pay a down payment, which is a one-time payment. Post that you will need to pay the monthly instalments for the house. The down payment on the house depends on the property valuation as well as the lender. The total disbursement that a lender can do for a home range between 75% to 90%. You will need to pay the remaining amount as a downpayment. Typically, it is recommended to pay 20% of the cost of the house as a downpayment.

According to RBI guidelines, if the property value is less than Rs. 30 lakhs, lenders can fund up to 90% of the property cost. The same amount reduces to 80% if the valuation of the home is between Rs. 30 lakhs and Rs. 75 lakhs. For houses that cost more than Rs. 75 lakhs, the maximum disbursement available is 75%. Thus, you will need to factor it into your planning phase.

Emotional State

When you plan to buy new home, it certainly will act as an asset. Yet often, the decision is emotionally driven. Having a house of your own will offer an immense amount of mental peace, as you never have to worry about relocating or worrying about a fussy landlord. Buying a house also results in an advancement of lifestyle, depending on where you are moving to. It gives you access to a better neighbourhood and facilities.

Mortgage Rates

Another important factor to consider while buying a house is the mortgage rate. It is essentially the interest rate that a lender charges when you opt for a loan. On repayment, you must pay the principal amount and the interest accrued on it. It does not come as a surprise that a lower interest rate is favourable for a large purchase such as a house. You can compare different lenders and opt for one that offers a lower interest rate.

Apart from the interest rate, the duration of the loan also plays a significant role in determining the monthly instalments. If you opt for a longer-duration loan, the EMIs would be reduced by a considerable margin. At the same time, it would also result in a higher interest payment. Based on your current source of income, you can opt for a higher or lower duration for the loan. When you do opt for a mortgage, it is highly recommended to buy home insurance to secure your assets. Considering the higher value proposition, a home insurance plan will safeguard your finances and future.

Supply and Demand

The real estate business also works on the same supply and demand principles as any other business. When there is a high demand for houses and there aren’t enough houses available, the prices of the existing ones shoot. Likewise, if the supply exceeds the demands of the market, the prices take a dip. If you are looking for a house in a locality that has a lot of facilities and a huge demand, it is likely that you will end up paying a higher price for the house. As compared to a property, that is on the outskirts of the city.

Monthly Budget

Before taking the plunge to buy new home, it is of paramount importance that you go over your monthly budget a few times at least. Apart from the instalment of the house, you will have to set aside an amount for your monthly expenses, rent of your current house, home insurance and a lot of other miscellaneous expenses. Make sure to work on your budget thoroughly before committing to the purchase. There are a lot of online tools, which can aid you in the process of planning the monthly budget.

Conclusion

Buying a new home in a metro can be a bit overwhelming. To aid you in the process of buying your new home, you can consider the above parameters before deciding on the property. Considering that it is going to be one of the larger purchases of your life, a robust home insurance policy will make way for a hassle-free ownership experience.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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