Once in a life time you buy a home. You save your hard earned money for years and then finally make a decision to buy a home.
Each one of you would like to own a house someday. However not everyone can afford to buy and they continue to live in a rented house.
On the other hand those of you who can afford buying a home make some serious mistakes and end up paying more what they would have otherwise.
10 Ways to Save Money on Buying a Home
Here in this article we give you 10 things that you need to keep in mind before you buy a home so that you can save big money.
1. Wait For the Right Time
Realty is all about the timings. Always invest in a property when market is low and prices have come down.
In the recession period, price of properties could fall 10% to 15%. You can wait for this cyclical period and then make a final call.
Most of the times each one of you don’t have an idea about the market, so you can consult an agent. And try to purchase the ready to move property when the market is down.
Moreover, you can also look out for distressed sellers who are desperate to sell their home for a very low price.
2. Compare the Price of the Property Online and Offline
Today you have dozens of real estate websites online that can help you to get best price for a piece of property in an area of your choice.
You can search for all the variables and get the best quotes in just seconds.
If you are done with online research you can move to offline research. You can always consult a real estate broker who knows the best.
He will be able to give you most competitive price in your area.
Basic research could save you a lot of money because you have exhausted all the options.
3. Ready to Occupy Projects or Under Construction Projects
Now comes the serious part of the article.
The biggest dilemma a buyer faces is whether go for finished projects or projects which are under construction.
Finished projects could cost you 20% to 25% more because you will get the possession very soon.
On the other hand projects which are under construction are a lot cheaper as builders are ready to give you concession.
But under-construction projects attract VAT & service tax so always check the difference between the market rate of the similar projects & under-construction projects with these taxes.
Additionally there is a risk that the project may not ever get completed. Even if you cancel the booking the builder can deduct 10% to 20% of the down payment you already paid.
So where do you invest money?
If you have money then go for ready to occupy apartments but if the builder is reputed then invest in under construction projects.
4. Your Buying Strategy – Construction Linked Plan Vs Subvention Plan
Construction Linked plans have become more popular because delays have become endemic.
In construction linked plan you pay 5%-10% at the time of booking, another 5-10% in next three months and 20% in coming six months.
The remaining amount 60-70% is paid according to the progress in ongoing construction. This plan is best pay for people who don't have huge surplus cash.
Subvention plan is same as construction linked plan but here the buyer also takes a loan for remaining amount. Here builder will pay the EMI till the possession.
On the outside subvention plans look good but the interest rates incurred by the builder while paying EMI is passed on to the buyer in the form of higher prices.
However, down payment with subvention plan is quite low.
5. Home Loan Interest Rates – Pay as Much as Down Payment
Most of us are going to take a loan for our new home. One of the smartest money saving tip for home loan would be pay as much as you can for the down payment.
The interest rates can go up to 10%-12% and if you are taking loan for 80% of the buying cost then it is a rip off.
It is better to pay more than 40% for the down payment and take loan for rest of the amount.
6. Home Loan Interest Rates – Going with Builders' Bank or Choosing Your Own
There is a choice between going with the bank that your builder has tied up with or choosing your own bank for the taking a loan.
A tie up with a bank does not mean that the interest rates are also great. It is better to choose your bank and have a discussion with the representative at the bank.
Moreover always take a loan on the basis of current interest rates and not on the future's.
7. A Lot of Money is to Be Saved on Taxes
You get tax rebates if you buy a property on a loan. For a self occupied property a borrower can claim up to 200000. You can take a joint loan and claim deductions for both principal and interest.
You also get tax rebates while you own it. If you have only one house and it is occupied then there is no taxation.
But if you have more than one house then you have to pay tax on it. However you can claim deductions on municipal taxes.
8. Pay Only for Carpet Area and NOT for Balcony
Usually builders cheat you when it comes to telling the real carpet area.
It happens that you buy a home because the carpet area promised by the builder is very good but instead of increasing the carpet area they increase the size of the balcony.
So you pay for a big balcony and not for the rooms inside. If you are smart enough then you can save up to 2-5% of the price of your new home.
9· Go For Cash Discounts Over Freebies
In order to get cash, builders are ready to offer freebies to their customers. But if you are smart enough then don't ask for the freebies and ask for the cash discount.
Moreover these freebies are already factored in the price of the apartments so it is better to negotiate for the cash discount.
10· Save Money on Unnecessary Amenities and Branded Developers
Do not go for over priced homes. Their price is inflated because of so called amenities like swimming pool, club house, gym, garden, amphitheatre etc.
All these amenities are just going to inflate the price up to 20%. So avoid unnecessary amenities and just look for the basics.
Similarly you save a lot of money by going for a non branded developer.
So these were few tips that you need to keep in mind before you buy a house. These tips can easily save you at least 10-15% of the buying cost.
You don't buy home every week so be smart to save money on it.