Ever heard phrases like ‘Where Dreams Come Home!’ or ‘This is your dream home right here!’? Well, I’m not here to pitch you a house. I’m here to discuss how you can save a significant amount of money when you consider buying a house.
But before diving into the money-saving strategies, let’s tackle a fundamental question: Is buying a house the right move, or should you stick with renting? The decision to buy a home goes beyond finances; it’s deeply personal.
We humans are emotional creatures, and for many, owning a property represents a lifelong dream.
Ways To Save Money
1. Special Discounts for Female Borrowers
Many banks offer attractive discounts on home loans when the applicant is a woman. While the percentage difference may seem small, typically ranging from 0.05% to 0.1%, the savings can be substantial.
Let’s consider an example: Imagine you’ve taken out a home loan of ₹50 lakhs for a 20-year tenure, and you’re eligible for a 0.1% discount on the interest rate. This seemingly modest reduction can translate into savings of approximately ₹1 lakh.
Several banks in India extend these discounts to female borrowers, including HDFC Bank, Union Bank of India, SBI, among others. Previously, there was the PM Awas Yojna scheme, where the Indian government provided subsidies of up to ₹2.67 lakh. However, this program expired in March 2022. While there have been calls to extend this scheme, the central government has yet to provide any updates on its status.
2. Tax Benefits
As a part of the mission by the government of India to help every Indian own their home by 2022, there are several Home loan tax benefits.
| Section | Maximum Deduction Amount | Deduction | Conditions |
|---|---|---|---|
| 80C | Up to ₹1.5 Lakh | Principal | Property should not be sold before five years |
| 24B | Up to ₹2 Lakhs | Interest | Home loan taken for buying/constructing the house; Property construction must finish within five years |
| 80EE | Up to ₹50 thousand | Interest | Loan amount should not exceed ₹35 lakhs; House value should be less than ₹50 lakhs |
| 80EEA | Up to ₹1.5 Lakh | Interest | Cannot claim 80EE if claiming benefits under 80EEA; Property value should 3not exceed ₹45 lakhs |
3. Invest Now, Buy Later
If you’re willing to postpone your home purchase, it’s entirely feasible to buy a house without relying on a home loan. Let’s illustrate this with a practical example. Suppose you have your eye on a ₹30 lakh house, and your current monthly rent amounts to ₹8,000. In contrast, the estimated EMI for a home loan spanning the next 15 years falls within the ₹30,000 to ₹40,000 range.
Instead of committing to EMIs, envision investing in equity over the same 15-year period, assuming an average return of approximately 15%. By the end of this period, your investment could potentially grow to ₹30 lakh (approximately ₹29,29,342, to be precise). It’s important to note that this calculation doesn’t account for inflation. As your income increases annually, you can gradually boost your investment amount over time.
Additionally, remember that loans come with interest payments. If you were to secure a ₹30 lakh loan for 15 years at an average interest rate of 8%, you would end up paying approximately ₹20 lakh in interest alone, resulting in a total repayment amount of around ₹50 lakh.
Effective Negotiation
When making a significant investment like buying a house, negotiation is key. Don’t forget to leverage your bargaining skills. For instance, if you manage to negotiate a 3% discount from the seller or builder, and the property is priced at ₹50 lakhs, you’ll be saving ₹1.5 lakhs right off the bat. Moreover, your savings can extend beyond the purchase price, as you’ll also be taking a loan for a reduced amount, thereby reducing the overall interest paid over the loan tenure.
Explore Under-Construction Properties
Consider exploring under-construction properties. Builders often offer discounts ranging from 9% to 12% to early buyers. Builders require cash flow during the construction phase, and this incentive is one way to attract customers. However, exercise due diligence by thoroughly researching and checking the Real Estate Regulatory Authority (RERA) details of the builder before making your final purchase decision.
Increasing Your Income or Pursue a Side Hustle
Suppose you’ve taken a ₹30 lakh home loan with an 8% interest rate for a 20-year tenure. By accelerating your loan repayment to just 14 years instead of 20, you could potentially save up to ₹10 lakhs in interest. To achieve this, you may need to increase your monthly EMI. Consider exploring opportunities to boost your income, whether through salary raises, promotions, or taking on a side hustle. The additional income can significantly aid your efforts to save money and reduce your loan burden.
Conclusion
Buying a house is a big decision as for many, years of income is spent to buy a property & it can also have a significant impact on your finances. So, finding ways to save money, invest smartly & saving a even a small percentage can make a huge difference.
But remember to thoroughly research the builder, seller & even the agent/brokers (if you are dealing with any).
When doing a job in metropolitan cities, it gets difficult to keep a track of savings. Fello can help you save and invest like a pro. Fello is a great avenue to develop a saving habit. The rewards make saving fun, and the investment opportunities make saving even more rewarding. Fello is also a great way to protect your money from inflation. By investing your money in Fello, you can grow your money and keep it safe from the effects of inflation. With prudent investment decisions and patience, you can work towards achieving your financial dreams with these rewarding assets.
