New Year Goals For Home Owners

While many of us are still preparing to buy homes, there are many fortunate ones who have accomplished the task, considering that the COVID-19 pandemic gave many of us a big push towards home ownership. Also, amid record low interest rates and decade-low property prices, the year 2021 became one of the best times for property  purchases, monetarily speaking. Now, what goals should homeowners set for themselves in 2022, if they have already made the biggest purchase of their lives?

Here is what homeowners must do in the New Year:

We are certain a great deal of time, energy and money was spent in accomplishing the task. However, there is so much that still needs to be done. After settling in, you may realise that you need to make certain corrections in the kitchen or the bathroom. Naturally, new furniture must be bought to suitably adorn the brand-new home. If the house is far from the city centre, the need for buying a second car may also come up. Basically, there are so many 'pressing needs' that need to be fulfilled, and doing so would require spending significant money. Since you may have exhausted a great deal of your savings and may already be running short, entertaining the idea to make new purchases would drain you, financially and psychologically. Hang on, till your coffers are once again replete. The longer you stay in your new home the better you would be able to understand your 'real' requirements.

Also, do keep in mind the fact that the economy, which is still reeling under the impact of the Coronavirus pandemic,  will take a long time before it is able to reach its past healthy state. Making big expenses is a task best avoided, till normalcy is restored.

You may have bought a house when interest rates were at a record low - with the RBI slashing the repo rate to 4 per cent, banks are currently offering home loans at below 7 per cent interest rate. Now, to be able to remain a smart investor, you will have to watch movement of interest rates closely. After touching a record low, rates might move upwards after while. 

It is also worth mentioning here that banks generally do not inform borrowers about the changes in rates, upwards or downwards . It is the responsibility of the borrowers to track the movement, approach the bank and demand the benefits, in case there has been a reduction. You could also opt for a fixed rate of interest from a point from where you perceive rates may move upwards only. Case in point is, never for once can you overlook your responsibility as a borrower now.

Once the initial euphoria of becoming a home owner subsides, many of you may start thinking and then over-thinking about the debt as a burden. While it is a great thing to be acutely conscious of your responsibility as a borrower — you have to pay the EMIs on time, you have to make sure there are no defaults, etc. — do not let the idea of being under debt overwhelm you. Don't be in a pressing hurry to prepay the loan as soon as possible. Not only would such hasty move result in financial loss but it would also mean you have not been able to leverage the benefits that come in the form of a loan. It is only after doing all the calculations — take the help of a chartered accountant, if need be — before you hurry up to prepay.

Some of you may be thinking of withdrawing your pension fund money to rid yourself of the big loan burden. This would result in lower monthly EMIs or a shorter tenure. This is not the best idea though. Using all your money only to prepay your loan is not what smart investors do. While a part of your savings could be employed in that respect, part of it should be put in channels from where you can earn good interest. Do be mindful of the fact that no matter how valuable your property is, it remains an illiquid asset. For your other needs, you would require liquidity. Wisely divide your earnings in different asset classes.

Home switching is one of the main characteristics of the property markets of the west. This trend is picking up in India, too. Far behind us is the time when we did not want to sell our first home, because of the emotional value attached to it. It would certainly be rough to get stuck in a small home for the rest of your life when there is an option to move to bigger and better home. In case this is your first home and you are yet to find your 'dream' home, you must keep your aspirations alive. If you are able to plan your finances wisely, you may be able to move to a bigger and better place by selling your current home at a profit.