Question

What financial decisions should be included when purchasing a new home?

Answer 1

While purchasing a new home, several aspects need to be taken care from finance point of view.

1)Affordable down-payment: the down payment should not be so high eroding all working capital.

2) Affordable interest rates: the interest rates should not be so high. It should be as per the normal market rates.

3) amount of EMI payable should not be more than 50-60% of total income, so as to maintain the regular working capital.

4) The overall cost of the house should not be more than the benefits we derive from it. It means, incase we are purchasing it so as to give it as lease to someone, the present value of expected lease payments and residual value should be more than the purchase cost.

In case we are purchasing it so as to live in that house, the present value of expected rent paid by us, in case we stay outside should be more than the purchase cost less expected residual value.

5) you should have the ability to pay the EMI regularly through out the loan period.

Hope it helps,

Thank u.