10 questions you must ask before buying another house

As we start experiencing good governance in India, our hope for #AchheDin indicates that we all would like to explore possibilities of making more wealth for ourselves in next 5-10 years. It will surely be purchase of gold for some, while some will have appetite to buy mutual funds and invest in share market, but if we have more than just 'some funds' we might look for an option to purchase a property. Now how many of us are having all 100% funds aggregated somewhere & buy a new home? Very few indeed, and our lifestyle says, if we have 40 lacs, we will buy a property worth at least 1 crore if not more. And all of us are inclined towards taking a home loan for making that purchase, which is good news for my banks and builders too.

While you are still thinking it is important for you to sit down and discuss the decision with your spouse. With both the husband and wife working and taking loans, there are quite a few issues that may crop up. So to avoid this it is vital for us to introspect.

Is your spouse working and are you happy being employed?
The first thing is to plan about possibilities. You might want to pursue alternate career options or higher studies, may want to take a break, bear a child or simply may not feel the need to work anymore. Make sure that you are not forced to continue against your will, just because you are under a debt. It might cause crack in the relationship if the purchase-decision was one-sided and as a result the property will no more be a heavenly abode! Without one person working, the loan EMI may become too much for the other.

Is your choice of property under-construction & you are living in a rented accommodation?
Bearing double-expense for the same cause may not be a good idea given that you are in a high-rent accommodation and your company does not bear that cost. If the property is under-construction, the pre-EMI may not be initially high to pinch you, but as and when the further transactions start getting disbursed, it will become a burden. To top it, if the property gets delayed for possession and you have already drawn down your 90-95% loan, it will be too much to bear. The amount will be as good as the loan EMI without having a single penny repaid towards principal & you will not have any choice. I know many people who, at this point of time, try to sell the property. What would be the point to bear so much interest for few years, if you can never enjoy the home? And are you sure it will get sold? And even if it does, will make any profit for you?

Do you have a small child or are you an expecting mom?
It is difficult to bring up kids in nuclear families and on several occasions the mother has to quit working after pregnancy to take care of the baby. Let your personal wish not get deterred by an external force like bank-EMI. If that happens, the home-buying experience will not remain good anymore. It will become a 'sacrifice'.

Are your parents/ in-laws self-sufficient or they are dependent on you?
Your aged parents or in-laws may be dependent on you. You may need to take care of them financially and at this age, their health is a big matter. So, if you need to be planning a big investment, then consider them as a part of your life-plan as well. But if you have parents who can chip-in or in case of any unforeseen reasons like job-loss etc. can help you with funds, then you may consider buying the property.

How have you planned your next 5 years' of large expenses?
If you have teenage kids or even grown up ones, you will surely have big expenses like higher education, marriage on the cards soon. There could be other expenses in the family, like your sister or brother-in-law's marriage, sending parents for a world tour or many more other promises you made or planned for yourself & family. Make sure those plans do not get cancelled or 'budgeted' for the shortage of funds. Everyone will blame you and you will not be happy buying another home for 'investment'.

Are you adequately covered under insurance?
Often people make this mistake of thinking that "Oh, I have bought plenty of insurance." Check once more. Are all your insurances life covers? What happens if you lose your job, or get diagnosed with a critical illness, or lose a limb? You need to think of 'what will happen if I live but don't earn' situation too. I suggest that you must cover your new home loan with an insurance too, which not necessarily will have to be a life cover.

Have you/your spouse quit voluntarily or have any threat of job-loss?
What if your spouse has quit voluntarily & you suddenly lose job? That situation can never be 'planned'. Right? Please discuss the steadiness of your job with your spouse without thinking whether he/she will be 'tensed'.

Are you still not settled in your new venture?
Do not approach any seller/builder to buy a property if you have plans to get a home loan for the purchase. In the early venture-state, no bank is going to give you home loan. I keep coming across people having healthy bank balance, but not having business-revenue yet. Lenders won't take this new profession of yours seriously unless you complete 2-3 years & start showing profits in books. In the middle of this, if you pledge your 40-50 Lacs of savings as 25% of your self-contribution to the builder as 'booking amount' & wait for a loan to happen, you are surely in trouble. Builder, in most probability, won't return 100% of your booking amount stating opportunity loss' for him.  It will be embarrassing too!

Are you forcing your spouse to agree to your decision or he/she is as aspiring as you?
This is a million dollar question & MOST IMPORTANT. To some of you, it may sound weird. You may think, 'why my wife/husband will not want a new home that we will jointly own?' Your spouse may not have the same risk appetite as you do, or he/she simply wanting not to buy another home with another loan! Check it out before you are too sure. Today, you may get through with making him/her jointly apply for the loan, but if anything goes wrong in future, you will be hearing "I told you so..." for the rest of your life!

Sukanya Kumar
Founder and Director
RetailLending.com