Ways to Save Money while Buying a House

If you don't love your Job, Take a Home Loan, You will start Loving it

“Where Dreams Come Home!” “This is your dream home right here!” No, I am not trying to sell you a house, just saying that these are the things brokers or builders tell you before selling a property.

If you are someone who is considering buying a house, then we will learn & understand how you can save a good amount of money for buying your property.

But before that, we need to understand if it is worth buying a house or staying at a rented property. So if you have an emotional reason to buy a house of your own, you are not wrong. because more than a financial decision, buying a property is a personal decision too.

We humans, are emotional beings and for many people owning a property is a dream of a lifetime.

Buying vs. Renting a house

Best ways to save money

Discount for female borrowers:-

Many banks give discounts on the home loan if taken by a woman. This move might save you thousands of rupees that can help you invest in other assets. The difference is not huge but the discount can range from 0.05% to 0.1%. 

Suppose you have taken a home loan of ₹50 lakhs for 20 years & get a 0.1% discount in interest rate. This 0.1% can save you around ₹1 lakh.

The banks that give discounts to female borrowers in India are HDFC bank, Union Bank of India, SBI, and many more. Earlier, there was a scheme called PM Awas Yojna, where the Indian government used to give a subsidy of upto ₹2.67 lakh, but it expired in March 2022. While there are demands to extend this scheme, there are no update by the central government on the same.

Invest now & buy later:-

It’s possible to buy a house without a home loan, if you can delay your home purchase. We can take one practical example, suppose you want to buy a house of ₹30 lakhs & your rent is around ₹8,000 & your EMI is around ₹30-40 thousand for the next 15 years. 

Rather than paying EMI, if you invest in equity for the next 15 years, assuming an average returns of around 15%, your maturity amount would be ₹30 lakh(~₹29,29,342). But here, we have not taken inflation into account & every year, as your income increases, you can increase your investment amount with time. 

Also, remember that you have to pay interest on a loan. If you have taken a loan of ₹30 lakh for 15 years & average interest is around 8%, then you will have to pay approximately ₹20 lakh in just interest & total loan amount you have to repay will be around ₹50 lakh.

Tax benefits:-

As a part of the mission by the government of India to help every Indian own their home by 2022, there are several Home loan tax benefits. 

The best way to save more tax is to buy a house as a joint owner & co-borrowers of a home loan. This way, both the borrowers can claim tax benefits of ₹1.5 lakh each under section 80C. Also, remember the condition that if you claim tax deductions under section 80EEA, you cannot claim tax deductions under section 80EE. 

Also, there are specific timeframes for claiming tax benefits. Section 80EE applies to loans taken between 1st April 2016 to 31st March 2017 & under section 80EEA, the loan must be taken between April 2019 and 31 March 2022. Deductions under section 80EE & 80EEA can be claimed only by first-time home buyers.

Negotiate with the seller:-

Buying a house is a big-ticket purchase so don’t forget to negotiate. If you are getting a discount of 3% from the seller or builder & the price of the property is ₹50 lakh, you save ₹1.5 lakh. You might end up saving more as you will take a loan of a reduced amount, also reducing the interest paid on the loan amount.

Explore under construction:-

If you can find some under-construction properties, you can get a discount of around 9-12% from the builder. This is because a builder needs some cash flow while constructing the building. Due to this reason, a builder might give discounts to early customers. Remember to research & check the Real Estate Regulatory Authority (RERA) details of the builder before making a purchase decision.

Increase your income or pick up a side hustle:-

If you have taken a home loan of ₹30 lakh at an 8% interest rate for 20 years & if you prepay the loan in 14 years rather than 20 years, you can save interest of upto ₹10 lakh. But to do so, you might have to increase your EMI amount. This can be achieved by increasing your income, or you can pick up a side hustle that can give you an extra income to help you save some money.

Conclusion

Buying a house is a  big decision as for many, years of income is spent to buy a property & it can also have a significant impact on your finances. So, finding ways to save money, invest smartly & saving a even a small percentage can make a huge difference.

But remember to thoroughly research the builder, seller & even the agent/brokers (if you are dealing with any).