A home purchase is likely to be one of the most important financial decisions we will make in our lifetime. However, it’s more than just that – there’s a significant emotional component to this decision, which can sometimes affect our budgeting strategy.
Here are 5 budgeting mistakes to avoid when buying a home:
1. Signing up for a home loan with a short tenure: If you have to choose between a home loan with a 15-year tenure and one with a 30-year tenure, it’s always advisable to go for the latter. With a longer tenure loan, you always have the option of paying it off earlier if you have the resources to. The shorter tenure only increases the burden of the EMIs, while also restricting your other investment options.
2. Not choosing the right type of interest rate: It isn’t necessarily true that a fixed rate of interest is preferable to a floating rate. It’s always a good idea to do your research before choosing the interest rate that works best for you.
3. Not accounting for additional residential expenses: When estimating the cost of a home, one often forgets to account for additional expenses like car parking, maintenance fee, etc. These expenses must surely be included in your budget.
4. Not factoring in the utility costs: Utility costs like water bills, electricity, cooling and heating, can account for a fair bit when it comes to your monthly living expenses. Make sure to account for those in your budget.
5. Not accounting for stamp duty and registration fee: The stamp duty and registration fee can add up to be as much as 8-10 percent of the cost of the home. Your budget must accommodate these necessary expenses.
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