One of the biggest dreams for almost all of us is to have our own home – be it a large villa or a small apartment. However, for most of us, this is the largest investment we ever make in our lives, and often it’s not possible to buy a house without financial assistance. Here are a few options you can look at to save for your dream home.
1. Plan in advance
If you want to buy a house when you are 40, then you need to start saving from the time you are in your early 20’s. It is advisable to invest in long-term growth assets – both debt and equities via a Systematic Investment Plan (SIP) route from as early as possible.
2. Make a budget
You need to create a detailed budget, not only of your monthly income and expenses, but also of the estimated cost of your dream house. Do not forget to factor in inflation and rising real estate prices. Then, determine the approximate amount of down payment you need to put down on the house. This will give you a clear financial goal that you need to work towards.
3. Control your cash flow
Ideally, one should have a monthly budget charting out the income and the various expenses. This will ensure that the savings and investments are done each month and unnecessary debt doesn’t build up.
4. Invest regularly
It is advisable to invest on a monthly basis (through a systematic investment plan/systematic transfer plan or any other mode of investment). Automating the investment process by a direct bank transfer to a mutual fund/recurring deposit, etc. will help to ensure that the savings objective is met and also curtail the number of impulse buys–thus keeping you within budget.
5. Maintain your savings
It is imperative to keep almost 3-6 months of income as savings/liquidity. This should be used only in emergencies and kept aside from other investments and savings.
6. Assess your eligibility
This is the final step for a loan. This depends on the repayment capability, income levels, existing debts and age. Since this is the most preferred method of purchasing a new home, it’s advisable to check the eligibility early on in the process.