For most people, buying a home is the biggest investment of their lives. You see advertisements on social media, print and discuss with your family about investing in a new home. You are excited and have decided to keep in order for your rainy day funds. You talk to an agent or a developer and plan a visit to the site. After your visit, you feel that the neighbourhood is perfect, the project has great potential and the price is affordable.
All these things are great until you find there is a lot of financial planning you need to do before finalizing your decision. When you see the asking price, it’s just the beginning, so be prepared for some extra expenses – and often unexpected, which can leave you underwater in your own new home.
1. The Devil is in the Details
For almost all type of real estate buying, the spending doesn’t stop with the unit price. When you are finalizing your deal, please go through all the details in the cost sheet. Apart from regular extra charges like car parking, EDC (extra development charges), club membership charges (if you buy in a gated community), you also need to be aware of homeowners insurance and closing costs.
While purchasing an under-construction house, you may understand the location, may be comfortable with the unit price but you can’t understand the final result, even if are satisfied with the model flats. You need a home inspector, a professional who can understand the design, architecture and technical stuff. So, this costs money too! Detailing is necessary because you need to understand the electrical wiring, foundations, width and height of the door and other minor details.
2. Do not ignore the creature comfort
There are certain costs that people do not consider because it is measurable at the time of purchasing decision. If you are moving from the world of renting to the world of homeownership, you will probably be encountered numerous financial problems such as high utility bills, maintenance budget etc.
When you are moving to a new home, it’s a natural tendency to put aside old stuff and buy a new one. For example, your furniture is too old-fashioned for your new home, so you want to replace it. You buy a garage or parking in your new gated community but you do not have a vehicle. So, it’s an instinctive buying decision that you are forced to take.
3. Plan ahead to minimize cost
If you are looking for a resale house or ready-to-move-in property, you need to evaluate the cost of home improvements and research how much those improvements would cost. This research thing is important because people think that they could fix a plumbing issue or small construction fixation for a few thousand rupees and then realizing it will go onto the roof.
You need to define how much you intend to put towards your down payment and look at how much money you can afford for home improvements and minor costs like lock replacement etc. You need to minutely observe everything that requires a change such as HVAC system upgrade, a new washer and others.
Before and after purchasing a home, you need to spend lots of unwarranted money. To avoid this financial toll, you need to look forward and think deeply about the burden of cost that you will bear after purchasing a new home. Therefore, it is imperative to do financial checklists before purchasing a home.
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