How Much Money You Need to Buy a House

Flats and Keys

24 Aug 202408:10

Summary

TLDRIn this informative video, Rohan Bhardwaj discusses the financial considerations for buying a home in India. He explains the importance of having sufficient savings and eligibility for a home loan, as well as the additional costs involved in property purchase such as stamp duty and registration fees. Rohan also highlights the ideal scenario of allocating only 30% of one's income for home loan EMIs, ensuring a balance between housing expenses and other financial needs. He further explores the benefits of under-construction properties, comparing them with ready-to-move-in options, and advises on the best approach to budgeting for a home based on cash in hand, loan eligibility, and EMI affordability.

Takeaways

🏡 Buying a home in India requires careful financial planning and understanding of the costs involved.
💰 The amount of money needed for buying a home depends on the property's value and the buyer's eligibility for a loan.
🏦 Banks typically provide a home loan up to 80% of the property's value, with the remaining 20% being the buyer's contribution.
📋 Additional costs such as stamp duty, registration fees, transfer charges, and broker commissions can add up to nearly 10% of the property value.
💡 It's advisable to have at least 6 months of expenses saved up for emergencies and to cover monthly investments.
📈 The home loan's EMI should ideally not exceed 40% of the net family income, considering all current EMIs including car loans, phone loans, credit cards, etc.
🔢 The maximum home loan amount one can afford depends on the cash in hand, loan eligibility, and the capacity to pay the monthly EMI.
🏗 For under-construction properties, an upfront payment of 10-15% is required, with the balance paid to the builder by the home loan company and the final 5-10% by the buyer at possession.
🌟 Under-construction properties can be a good option if one can save and invest the remaining amount for 5-7 years before possession.
📊 The final budget for a property will depend on the combination of cash in hand, loan eligibility, and the capacity to afford the monthly EMI for all loans.
🚫 The logic explained in the script may not apply to Maharashtra, where under-construction properties require a minimum of 15-20% upfront payment for stamp duty and registration.

Q & A

What is the main topic of Rohan Bhardwaj's video?
-The main topic of the video is discussing the financial considerations and steps involved in buying a ready-to-move-in or under-construction property in India.
What is the purpose of Rohan Bhardwaj's new channel?
-The purpose of the new channel is to share powerful life skills that can help viewers achieve success in various aspects of life, including career and business.
According to the video, what percentage of the property value should one expect to contribute themselves when buying a home?
-One should expect to contribute around 20% of the property value themselves, as banks typically provide a loan up to 80% of the property value.
What additional costs are associated with buying a property that are not included in the property value?
-Additional costs include stamp duty, registration fees, transfer charges, broker commissions, and other miscellaneous expenses, which can total up to approximately 10% of the property value.
What is the recommended financial backup one should have before buying a property?
-It is recommended to have a financial backup that covers at least 6 months of expenses and an emergency fund, as well as a backup for monthly investments.
How does the home loan EMI affect the budget for buying a property?
-The home loan EMI should not exceed 40% of the net family income, which includes the combined income of all family members involved in buying the property.
What is the maximum loan amount one can get based on their monthly net income?
-Banks typically offer a home loan amount up to 60 times the monthly net income, depending on eligibility.
What is the significance of having a clear budget when considering buying a property?
-Having a clear budget helps determine the cash in hand, home loan eligibility, and the monthly EMI one can afford, which in turn helps in identifying suitable properties within the budget.
What is the difference in upfront payment between a ready-to-move-in property and an under-construction property?
-For a ready-to-move-in property, an upfront payment of about 30% is required, whereas for an under-construction property, it's typically between 10% to 15%.
Why is it important to maintain a certain level of savings after buying a property?
-Maintaining savings is important to cover ongoing expenses related to the property, such as maintenance, taxes, and potential future investments or emergencies.
What is the advice given for those who cannot find a ready-to-move-in property within their budget?
-If a suitable ready-to-move-in property is not found within the budget, one can consider increasing the budget by moving towards under-construction properties.

Outlines

00:00

🏠 Home Buying Finances in India

The first paragraph discusses the financial considerations for buying a home in India. It emphasizes the importance of understanding the costs involved in purchasing a ready-to-move-in or under-construction property. The speaker, Rohan Bhardwaj, introduces his new channel focused on sharing life skills to help viewers achieve success in various aspects of life. He also touches on the additional costs beyond the property value, such as stamp duty, registration fees, transfer charges, broker commissions, and the overall percentage these costs represent of the property value. The paragraph concludes with a calculation example, explaining that if one has a certain amount in savings designated for buying a home, they can afford a property of up to 10 times that amount after considering the loan and additional costs.

05:02

🏗️ Understanding Under-Construction Property Investments

The second paragraph delves into the specifics of investing in under-construction properties. It outlines the payment structure, where an upfront payment of 10-15% is required, followed by the builder receiving 65-70% from the home loan company, and the final 5-10% paid by the buyer at the time of possession. The paragraph also discusses the importance of having a clear savings plan to cover these payments over several years and the benefits of under-construction properties, such as the potential to invest a smaller upfront amount and acquire a more valuable property by the time of completion. The speaker also mentions regional differences in payment structures, particularly in Maharashtra, and advises viewers to consider their budget, cash in hand, home loan eligibility, and monthly EMI paying capacity when deciding between ready-to-move-in and under-construction properties. The paragraph ends with a reminder to maintain a backup for at least six months of expenses and emergency funds, as well as investments, to ensure financial safety.

Mindmap

Keywords

💡Home Buying

Home buying refers to the process of purchasing a property for residential use. In the video, the theme revolves around the financial considerations one must take into account when planning to buy a home in India. The script discusses the various costs associated with home buying, such as loan eligibility and additional expenses like stamp duty and registration fees.

💡Ready-to-Move Property

A ready-to-move property is a type of real estate that is already constructed and available for immediate occupation. The script mentions this as an option for those looking to buy a home, contrasting it with under-construction properties where the buyer has to wait for the property to be completed.

💡Under Construction Property

Under construction properties are those that are still in the process of being built. The video discusses the financial implications of buying such properties, including the upfront payment required and the builder's contribution towards the property's cost.

💡Loan Eligibility

Loan eligibility is the assessment of a potential borrower's ability to secure a loan based on factors like income, credit score, and existing financial obligations. The script explains how loan eligibility affects the amount one can borrow for a home and the subsequent monthly installments.

💡Stamp Duty

Stamp duty is a tax levied by the government on legal documents, including property transactions. The video script mentions stamp duty as one of the additional costs that home buyers need to consider, which can be a significant portion of the property's value.

💡Registration Fees

Registration fees are charges paid to the government for registering a property transaction. The script highlights these fees as part of the total costs involved in buying a home, which are not included in the property's value but must be paid by the buyer.

💡Broker's Commission

Broker's commission is the fee paid to a real estate agent or broker for their services in facilitating a property transaction. The video script includes this as one of the additional expenses a buyer may incur when purchasing a home.

💡Self-Conttribution

Self-contribution refers to the amount of money a buyer must pay out of their own pocket towards the purchase of a property. The script emphasizes the importance of having sufficient self-contribution in addition to the loan amount to cover the property's value and associated costs.

💡EMI (Equated Monthly Installment)

EMI is the fixed amount paid by a borrower to the lender each month until the loan is fully repaid. The video discusses how EMIs are calculated based on the loan amount, interest rate, and tenure, and how they should not exceed a certain percentage of the borrower's monthly income.

💡Net Monthly Income

Net monthly income is the income remaining after taxes and other deductions have been made. The script explains that the bank calculates the home loan amount based on a multiple of the borrower's net monthly income, which is crucial for determining loan eligibility.

💡Emergency Fund

An emergency fund is a reserve of cash set aside to cover unexpected expenses or financial emergencies. The video script advises keeping at least six months' worth of expenses in an emergency fund, which is an important financial consideration when planning for a major purchase like a home.

Highlights

In India, everyone dreams of buying a home, but the financial requirements can be daunting.

Discussing the financial planning required for buying a ready-to-move-in or under-construction property.

The importance of having sufficient funds for the property's value and additional costs beyond the property price.

Banks typically provide a home loan up to 80% of the property's value, with the buyer contributing the remaining 20%.

Additional costs such as stamp duty, registration fees, transfer charges, and broker commissions are not included in the property value.

The total additional costs can amount to nearly 10% of the property's value.

For those with a certain amount in lakhs saved for buying a home, calculating the maximum property value they can afford post-home loan.

The recommendation to not invest all savings into buying a home, and instead maintain a backup for 6 months of expenses.

The need for an emergency fund and investment backup, especially if monthly investments are planned.

Calculating the home loan eligibility based on the net monthly income, with banks typically offering up to 60 times the net monthly income.

The monthly EMI for a home loan should ideally not exceed 40% of the net family income, considering all current EMIs.

The importance of not letting the home loan EMI exceed 40% of the net monthly income to maintain a sustainable lifestyle.

Considering the combined EMI of all loans should not exceed 50% of the monthly income for financial safety.

The strategy for calculating the budget for a home purchase based on cash in hand, home loan eligibility, and monthly EMI affordability.

The difference in upfront payment required for ready-to-move-in properties versus under-construction properties.

The benefits of under-construction properties in terms of lower upfront payment and time to arrange funds.

The importance of having clarity on the ability to save towards property value appreciation and the feasibility of under-construction properties.

The video aims to provide clarity on setting a property budget considering cash in hand, home loan eligibility, and monthly EMI affordability.