How do you know when it’s the best time to buy a house? For most of us, buying a house is one of our biggest dreams. It generally signifies settling down after marriage and indicates personal and professional stability. Ideally, it also means that our finances are in order. Ram began to think that it was the perfect time to buy a house. His parents were now retired, and he had moved to a different city which offered him better pay. He was also married and was ready to start a family. However, it was also one of the largest purchases he would make in his lifetime – so Ram began to wonder if he was ready for that commitment.
Ram decided to run a financial health check before jumping into the decision of buying a house. He had around 50% of his desired property’s value saved up for down payment. However, this meant that he had to wipe out the entire investment portfolio that he had diligently built over the years. He would also end up taking a housing loan for the remaining 50%. A small mental calculation was enough for Ram to figure out that he would be spending close to 40% of his income on the EMI alone. Ram’s financial advisor recommended him to limit his EMI to 25% of his income.
Though buying his own house seemed tempting from all aspects, Ram decided to postpone the idea of the asset purchase. He was not ready to take this huge commitment on his shoulders. He recognised that he may have to compromise his lifestyle and start saving from scratch if he chose to buy the house immediately. More importantly, he knew that he would never be able to bring himself to sell his first house should there be any financial requirement. He decided to keep supporting his parents and continued with his investment plan so that he could build a bigger down payment for the house a few years down the line. In the meantime, he would also be able to cater to his other goals.
Surely, in the long term, Ram would be in a better position to buy his own house without worrying about his EMI.