Diwali Home Buying Tips: Many people fulfill their long-held dream of buying a home during Diwali. You have selected a property, arranged the down payment, secured a home loan, and the EMI fits your budget. In such a scenario, the decision to buy a home might seem straightforward. However, basing your budget solely on the EMI can prove to be a costly mistake.

Purchasing a home involves various additional expenses, such as stamp duty, registration charges, loan processing fees, and interior costs—all of which can amount to lakhs of rupees. Therefore, it is essential to account for these expenses before finalizing a property.

According to Atul Monga, CEO and Co-founder of BASIC Home Loan, when planning to buy a home, one should include not just the EMI, but also other costs that are often overlooked in initial calculations.

1. Maintain an emergency fund after the down payment

Suppose you are buying a home for ₹80 lakh. You pay ₹16 lakh as a down payment and take a home loan for the remaining ₹64 lakh. If the bank approves the loan, at an interest rate of 8.5% over a 20-year tenure, your monthly EMI would be approximately ₹55,500.

This represents a significant monthly commitment. But a crucial question remains: how much savings will you have left after making the down payment?

If you exhaust all your savings on the home purchase, you could face difficulties in the event of an unexpected expense or a loss of income (such as job loss). According to Atul Monga, you should maintain an emergency fund—separate from the money used for the home purchase—that covers 3 to 6 months' worth of essential expenses.

2. Stamp duty and registration costs

The price of the house is not your total cost. When purchasing a property, you must also pay for stamp duty and registration. These rates can vary depending on the state, the category of the buyer, and the applicable regulations. For example, if these two types of expenses amount to 5% to 8% of the property's value, you might end up paying an additional ₹4 lakh to ₹6.4 lakh for a house priced at ₹80 lakh.

Typically, this amount must be paid separately; it is not guaranteed that a home loan will cover it entirely. Therefore, ensure you account for these costs when arranging your down payment.

3. Factor in home loan processing fees

When taking out a home loan, most people focus primarily on the interest rate. However, there are other charges to consider, such as processing fees, legal verification costs, and property valuation charges.

Atul Monga notes that if the processing fee for a ₹64 lakh home loan is 0.5%, it would amount to ₹32,000. Additionally, applicable taxes and other charges may also apply.

Fees vary across different banks and lending institutions, and in some cases, you might even be eligible for a waiver. Therefore, inquire about all applicable charges before finalizing your loan; making a decision based solely on a low interest rate could be premature.

4. Consider insurance-related expenses

It is also important to account for insurance costs when purchasing a home. Home insurance provides protection against certain types of damage to the property, while life insurance or loan protection insurance can help cover the outstanding home loan balance under specific circumstances.

These serve different purposes. The premiums depend on the policy, the level of coverage, and the insurance provider. Check with your bank to understand which insurance policies are mandatory and which are optional. Be sure to carefully read the policy terms and conditions, including any exclusions (risks that are not covered).

5. Costs for interiors, shifting, and maintenance

Receiving the keys to your home does not mark the end of your expenses. Making a house livable often involves costs for painting, furniture, electrical fittings, household appliances, and minor repairs. Furthermore, you must also account for the expenses associated with shifting your belongings. According to Atul Monga, depending on the condition of the property and specific requirements, these expenses could range from ₹3 lakh to ₹8 lakh or even more. For an ₹80 lakh home, this amount translates to approximately 4% to 10% of the property's value.

Additionally, there may be costs such as society maintenance charges, security deposits, and other payments due at the time of taking possession of the home. While these expenses might seem small individually, they can disrupt your budget when combined. Therefore, it is advisable to plan for them in advance. Relying on credit cards or personal loans immediately after purchasing a home can lead to further financial strain.

Prepare a comprehensive budget before buying a home.

Taking the example of an ₹80 lakh home: a down payment of ₹16 lakh would be required; stamp duty and registration costs could range from ₹4 lakh to ₹6.4 lakh; and interior work and shifting expenses might amount to ₹3 lakh to ₹8 lakh. In total, these initial costs could reach between ₹23 lakh and ₹30.4 lakh. This does not include insurance or other charges related to the home loan.

Furthermore, you will also need to pay an EMI of approximately ₹55,500 every month. Consequently, it is not enough to simply look at the loan amount offered by the bank and the resulting EMI.

Atul Monga suggests that before purchasing a home, one should carefully calculate both the initial costs and the expenses that will arise after taking possession. Additionally, it is essential to set aside an emergency fund to help navigate any financial challenges that may arise after the home purchase.

PC Social Media