In India, most people consider buying a house as an important financial goal. Despite this being among the most expensive financial goals, people take rash decisions and commit some common mistakes while buying a house. Here are a few such mistakes and suggestions to avoid them:
Under-estimating the total cost of the property: One of the most common mistakes committed by buyers is not estimating the actual total cost of the house before deciding on which property to buy. The rate per square foot multiplied by the total area is not the total cost. Remember that there are other costs like registration charges, stamp duty, parking costs, society charges and other charges like electricity and water supply charges. Also, banks do not fund these extra costs, and grant loans only to the extent of 80%-85% of the actual cost of the property. These additional costs can work out to be quite substantial and thus you must always ask the builder to disclose all these costs beforehand, so that you can exactly estimate how much you will have to pay from your pocket.
Choosing a house which costs more than what you can afford: Often, when actual costs are not correctly estimated, you end up settling for a house which you cannot afford. As mentioned earlier, banks grant only 80%-85% of the cost of the property, and anything above this should be funded by you. Lenders decide on the loan amount based on both the cost of the property as well as your income levels. Although each lender has different eligibility criteria for lending, you can generally expect a loan amount such that EMIs do not exceed 40% of your take home pay. When you decide to purchase a house without considering your loan eligibility, you will end up having to fund the remaining amount as a down payment, which will hamper your savings. Remember to always select a house within your affordability and budget, to avoid financial stress.
Not reading legal documents carefully: The house agreement you sign with the builder has several legal terms, and as a result only few buyers take the efforts to understand the finer details. This can land you in trouble if the intention of the builder is to take advantage of your lack of knowledge. Hence you must never ignore the terms of the agreement, and if necessary, take the help of a professional before signing on the dotted line.
Not understanding what you receive: Most builder quote the property rates based on the built up area and not the carpet area. As a result, you pay for the area of the walls of the flat as well as for the divided common area, in addition to the actual carpet area of the flat. Many buyers realise this later. Although this is the norm of the industry and cannot be changed, it is useful to understand these concepts before you purchase the property, in order to avoid shocks later. Also remember to confirm if the difference in area is really what is being declared by the builder.
Not determining the background of the builder and the potential of the property: Sometimes buyers do not bother to check the authenticity of the builder. It is very important that this is verified to be sure of the delivery of the property and also the quality of the products used. Looking at the past track record, checking reviews on online forums and considering the payment option by the builder are some ways of checking the genuineness of the builder. Buyers sometimes also make the mistake of not considering the potential of capital appreciation or connectivity facilities of the property. Remember to consider these factors as well.
Purchasing a property with no clear titles: Some builders build and sell houses on disputed land. Checking the land titles is an absolute must. If you happen to buy a property on disputed land, you will not be able to sell this property also at a future date. If you opt for a bank loan, the bank will get the title deeds verified. Nevertheless as a buyer, you must also check to avoid any mess.
Purchasing property purely based on offers: Many a time, builders offer limited period discounts and freebies to attract customers to purchase the property. Some buyers act impulsively to gain from these offers, without taking their financial position and other factors into consideration. Also, you must be cautious of builders offering huge discounts and opt for a house built by genuine builders only. While all such offers are not bad, you must not make this the sole deciding factor in choosing a house.
Buying your own house is a dream cherished by many, but achieved only by a few. If you plan to buy a house, remember to avoid the above mistakes.
This article was originally published on Stockmusings.com
Under-estimating the total cost of the property: One of the most common mistakes committed by buyers is not estimating the actual total cost of the house before deciding on which property to buy. The rate per square foot multiplied by the total area is not the total cost. Remember that there are other costs like registration charges, stamp duty, parking costs, society charges and other charges like electricity and water supply charges. Also, banks do not fund these extra costs, and grant loans only to the extent of 80%-85% of the actual cost of the property. These additional costs can work out to be quite substantial and thus you must always ask the builder to disclose all these costs beforehand, so that you can exactly estimate how much you will have to pay from your pocket.
Choosing a house which costs more than what you can afford: Often, when actual costs are not correctly estimated, you end up settling for a house which you cannot afford. As mentioned earlier, banks grant only 80%-85% of the cost of the property, and anything above this should be funded by you. Lenders decide on the loan amount based on both the cost of the property as well as your income levels. Although each lender has different eligibility criteria for lending, you can generally expect a loan amount such that EMIs do not exceed 40% of your take home pay. When you decide to purchase a house without considering your loan eligibility, you will end up having to fund the remaining amount as a down payment, which will hamper your savings. Remember to always select a house within your affordability and budget, to avoid financial stress.
Not reading legal documents carefully: The house agreement you sign with the builder has several legal terms, and as a result only few buyers take the efforts to understand the finer details. This can land you in trouble if the intention of the builder is to take advantage of your lack of knowledge. Hence you must never ignore the terms of the agreement, and if necessary, take the help of a professional before signing on the dotted line.
Not understanding what you receive: Most builder quote the property rates based on the built up area and not the carpet area. As a result, you pay for the area of the walls of the flat as well as for the divided common area, in addition to the actual carpet area of the flat. Many buyers realise this later. Although this is the norm of the industry and cannot be changed, it is useful to understand these concepts before you purchase the property, in order to avoid shocks later. Also remember to confirm if the difference in area is really what is being declared by the builder.
Not determining the background of the builder and the potential of the property: Sometimes buyers do not bother to check the authenticity of the builder. It is very important that this is verified to be sure of the delivery of the property and also the quality of the products used. Looking at the past track record, checking reviews on online forums and considering the payment option by the builder are some ways of checking the genuineness of the builder. Buyers sometimes also make the mistake of not considering the potential of capital appreciation or connectivity facilities of the property. Remember to consider these factors as well.
Purchasing a property with no clear titles: Some builders build and sell houses on disputed land. Checking the land titles is an absolute must. If you happen to buy a property on disputed land, you will not be able to sell this property also at a future date. If you opt for a bank loan, the bank will get the title deeds verified. Nevertheless as a buyer, you must also check to avoid any mess.
Purchasing property purely based on offers: Many a time, builders offer limited period discounts and freebies to attract customers to purchase the property. Some buyers act impulsively to gain from these offers, without taking their financial position and other factors into consideration. Also, you must be cautious of builders offering huge discounts and opt for a house built by genuine builders only. While all such offers are not bad, you must not make this the sole deciding factor in choosing a house.
Buying your own house is a dream cherished by many, but achieved only by a few. If you plan to buy a house, remember to avoid the above mistakes.
This article was originally published on Stockmusings.com
Smitha Hari
Team GettingYouRich.com
Team GettingYouRich.com
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