How to know whether you can afford to buy apartment?

Whether you are buying a 1 BHK apartment or a palatial villa, affordability is a major factor influencing your purchase decisions. How much you can afford depends on your current financial situation and expected changes in future. You may make some calculations about the resources and funds you can avail to purchase a home. However, banks and other financial lenders have their own systems for assessing the loan amount to be released if the property is to be bought with the help of home loans. It is essential to take into account these calculations as well before jumping into the property market.

Financial resources

A prospective home buyer is expected to have a clear idea about where the money for the purchase is coming from. Normally, people have two major sources of funds – savings and loans. Regular savings from monthly income is the usual way for accumulating money for home buying. One of the downfalls of this is that it may take several years before you can make the required funds. Sometimes, this amount may not be sufficient even for making the down payment. Studies show that for a low to middle income buyer this could mean spending almost half of their lifetime to earn and save to buy an affordable home. In the big Indian cities residential properties are out of reach even for an individual with an annual income of Rs. 20-25 lakh. This is one of the reasons why more people prefer to rent out houses and apartments in cities like Ulwe. Even the low budget apartments in Ulwe cost around Rs. 10-20 lakh.

Some people have other resources like family share or the money from the sale of another property. Some sell their gold and other precious jewellery to find the money for home buying. These are often backup resources when unexpected expenses arise during the transaction.

When it comes to home loans, lenders usually consider the take home salary after all the tax deductions to assess the repayment capacity of the borrower. This method can be employed by the borrower also to make a rough calculation about how much they can get as loan and the EMIs to be paid every month.

Cost of buying

Cost of ownership is another factor to consider while calculating your affordability. Whether you are buying affordable apartments in Ulwe or luxury apartments in Hyderabad, there are certain payments that are common to all property purchases. You need to pay purchase price, registration fees, and stamp duty. There is the real estate agent’s commission if you have hired their services. Residential association membership fee is another additional cost. Home loans would require loan processing fee which is deducted from the loan amount. Sometimes, there is an extra expense in the form of renovation costs depending on the condition of the property. All these costs must be taken into consideration for calculating the total expense involved in home buying. This would give you an idea of whether those cheap flats in Ulwe are really affordable or not.