While many of us are still preparing to buy homes employing all our cheese-paring tactics, there are many fortunate ones who have accomplished the task. What goals should they set for themselves since they have already made the biggest purchase of their lives? Here is what homeowners must do in the New Year:
Go easy for a while: We are certain a great deal of time, energy and money was spent in accomplishing the task. However, there is so much that still needs to be done. After settling in, you do realize that you need to make certain corrections in the kitchen or the bathroom. Naturally, new furniture must be bought to suitably adorn the brand-new home. Since the house is far from the city center, the need for buying a second car has also come up. Basically, there are so many 'pressing needs' that need to be fulfilled, and doing so would require spending a bomb. Since you may have exhausted a great deal of your savings and may already be running short, entertaining the idea to make new purchases would drain you, financially and psychologically. Hang on till your coffers are once again replete. The longer you stay in your new home the better you would be able to understand your “real” requirements.
Watch interest rate movements closely: You may have bought a house when interest rates were at a record low. Now, to be able to stay is a smart investor, you will have to watch the movement of interest rates closely. It is worth mentioning here that banks generally do not inform borrowers about the changes in rate cuts. It is the responsibility of the borrowers to track the movement, approach the bank and demand the benefits in case there has been a reduction. You could also opt for a fixed rate of interest from a point from where you perceive rates may move upwards only. Case in point is, never for once you can overlook your responsibility as a borrower now.
Don't let the idea of burden bother you: Once the initial euphoria of becoming a homeowner subsidy, many of you may start thinking and then over-thinking about the debt as a burden. While it is a great thing to be acutely conscious of your responsibility as a borrower — you have to pay the EMIs on time, you have to make sure there are no defaults, etc. — do not let the idea of being under debt overwhelm you. Don't be in a pressing hurry to repay the loan as soon as possible. Not only would such hasty move result in financial loss but it would also mean you have not been able to leverage the benefits that come in the form of a loan. It is only after doing all the calculations — take the help of a chartered account, if need be — before you hurry up to prepay.
Put your money to work for you: Some of you may be thinking of withdrawing your pension fund money to rid yourself of the big loan burden. This would result in lower monthly EMIs or a shorter tenure. This is not the best idea though. Using all your money only to prepay your loan is not what smart investors do. While part of your savings could be employed in that respect, part of it should be put in channels from where you can earn good interest. Do be mindful of the fact that no matter how valuable your property is, it remains an illiquid asset. For your other needs, you would require liquidity. Wisely divide your earnings into different asset classes.
Keep looking: Home switching is one of the main characteristics of the property markets of the West. This trend is picking up in India, too. Far behind us is the time when we did not want to sell our first home because of the emotional value attached to the concept. It would certainly be rough to get stuck in a small home for the rest of your life when there is an option to move to a bigger and better home. In case this is your first home and you are yet to find your “dream” home, you must keep your aspirations of having it big one day alive. If you are able to plan your finances wisely, you may be able to move to a bigger and better place by selling your current home at a profit.