A step-by-step guide to achieving the Dream of Buying your own House in Your 20s in India

Having your own house feels secure and has peace of mind, especially if you are living in a rented house and facing a lot of difficulties like water problems, neighbour problems, or landlord problems, you must be looking to buy your own house. 

The dream of owning a home is deeply ingrained in Indian culture. But for young adults in their 20s, with careers just starting and salaries still growing, that dream can feel distant.

However, with careful planning and a dose of reality, buying a house in your 20s can be a smart financial move.

I will explain the path step by step so that it would be easy for you to understand where to begin your plan and how soon you can have your own dream house!

Let’s start.

Have your ‘Why’ clear.

If you are planning to buy a house, then your ‘why’ the reason to buy, must be crisp and clear, as we’ve discussed in the first paragraph, a rented family or someone with family must have their own house, this is what I personally do feel.

How much stable is your job or monthly income?

This is the most critical thing. You can’t purchase your home if you are trying to purchase your house with a home loan but don’t have an adequate amount to pay monthly EMIs. So you should be financially stable financially. 

Do look into the company in which you are working, and visualize for about 5 to 10 years, is your job stable? Or are you earning enough? Or is there the future potential of switching jobs with a similar salary or better than this or any better side income earning opportunities? Etc etc….

Are you going to stay longer or permanently in that location for more than 10 to 15 years?

See I know that you are staying in a place in Hyderabad, and want to buy a house there, but first go deep and think if you are going to stay there for a longer duration or for your life with your family. Even if you have a slight doubt about your long term goals and switching your place of residence then please don’t buy your house there.

Even if your job is in the nature of switching with transfers, then don’t buy a house. First, finalise your home, the ultimate final destination, where you want to spend the rest of your life. 

Have a 20% Downpayment amount ready for the home loan.

For example, if you are planning to buy a house worth 40 laksh, then at least 8 lakhs of the amount must be ready for the initial downpayment to the bank home loan.

Home Loan Calculator

The home loan amount shall be equal to or lesser than 5x your annual house/ family income

You shouldn’t go for buying a house for 50 lakhs under a home loan, if your annual family income is Rs.5 lakh, as cumulatively it’s becoming 25 lacks, so try to find a property in this range, as the banks couldn’t consider processing your application as they also have to look into your repayment ability within a certain period of time, and you have to look into your daily house expenses and fullfil your needs, you just can’t spend 90% of income just for paying the EMIs.

For eg. if you are earning Rs.50,000, every month it’s your total family income including all your family members. Then your current annual income is 6,00,000 rupees. For 5 years it’s 30,00,000 rupees. So can buy a property with a home loan which is worth 30 lakhs or less, but before that, the downpayment of 20% of this 30 lakhs must be with you while going for the loan that is 6 lakhs rupees, so your final loan amount would be 24 lakhs after deducting the downpayment of 6 lakhs, and the interest amount will be calculated upon those 24 lakhs only.

If you don’t have your downpayment amount. Shall you go for a home loan?

No. Never. Always try to have atleast 20% of the downpayment of your target property. You can plan simple savings, FDs, RDs, or even SIPs to save for a year or two and have your initial downpayment ready for the bank home loan.

Be prepared for additional charges.

Other than the price of your property, there will be other charges such as processing charges from the bank, and stamp duty of around 5% in case of female, so try to register the property in the name of your mother, wife or sister. As it would cost you less for additional charges.

You have to be prepared for such small additional registration and processing charges too.

Have your one-year EMI amount handy.

Although you have paid your 20% of the down payment amount, but still have one year of EMis amount ready in your bank account so that you are ready for any kind of unforeseen circumstances, if you lose your job, or something happens in your life, but your house is safe with the savings for the EMIs.

Have your term insurance ready!*

Your term insurance protects you from any mishappenings like your death in the middle of the tenure, then your family will suffer a lot, so please buy term insurance on your name equal to or more than the home loan amount to keep your house secure and the life of your family members secure too.

The cost of term life insurance starts at 500 onwards, please go thorugh different insurance providers you will get an overall idea about it.

Save money, Cut unnecessary expenses.

Having a dream of your own house, takes a lot of effort and discipline, if you come from a humble middle-class background, then you have to save every penny possible and cut any unnecessary expenses. Find different other side sources of income along with your current monthly income to earn more. If your goal is bigger then your efforts should be bigger too.

Go for the lowest-interest banks.

Research before going to any banks for a home loan. Do proper research about interest rates, a 1% of 0.5% difference makes a lot of savings for your future EMIs. So consider this. Go for bigger well known banks mostly public sector banks instead of private banks. Do your own research on this to save a lot on your interest rates.

Try to bargain every inch possible to save atleast 0.5% on your interest rate and processing charges, it can help you to save a ton of money in the future.

Financial Discipline is Key

While the idea is exciting, remember, buying a house is a significant financial commitment. Here’s what you need to consider:

• Saving for a Down Payment: Most lenders require a down payment, typically 10-20% of the property value. This requires strict budgeting and saving.
• Hidden Costs: Factor in registration fees, stamp duty, and potential renovations alongside the base purchase price.
• Long-Term Commitment: A house is not just an investment; it’s a lifestyle. Are you prepared for the ongoing maintenance and responsibility?

Planning for Your 20s

• Be Realistic: Don’t chase a mansion. Consider a starter apartment or a property in a developing area that fits your current budget.
• Plan Your Finances: Create a budget that allocates funds for savings, living expenses, and potential emergencies.
• Explore Government Schemes: Schemes like Pradhan Mantri Awas Yojana can provide subsidies for first-time homebuyers.

Seek Professional Advice

• Talk to a Financial Advisor: A financial advisor can assess your situation and create a personalized roadmap to homeownership.
• Consult a Real Estate Agent: A good agent can guide you through the complexities of the Indian property market.

The Benefits of Early Homeownership

1. Long-term Investment: Real estate is often considered a stable and appreciating asset. Purchasing a home early can lead to significant capital appreciation over time, potentially offering substantial returns by the time you reach your 40s or 50s.
2. Stable Living Conditions: Owning a home provides stability and the comfort of knowing that your living situation is secure. This can be particularly appealing for young professionals who frequently relocate due to job changes.
3. Tax Benefits: Home loan borrowers can avail of various tax deductions, such as the interest paid on home loans under Section 24(b) and principal repayment under Section 80C of the Income Tax Act, which can lead to significant savings.
4. Personalization and Control: Owning a home allows for personal touches and renovations without the restrictions typically imposed by landlords. This can greatly enhance your living experience and increase the property’s value.

Challenges to Consider

1. Financial Burden: Buying a house requires a substantial financial commitment, including a down payment, loan EMIs, and maintenance costs. For young individuals, this can be a significant burden if not planned correctly.
2. Job Mobility: Young professionals often face job changes and relocations. Owning a home can limit mobility, making it harder to take advantage of career opportunities in different locations.
3. Market Volatility: Real estate markets can be unpredictable. Economic downturns, changes in interest rates, and local market conditions can impact property values and investment returns.

Steps to Achieving Homeownership

1. Financial Planning: Start by evaluating your financial health. This includes savings, income, existing debts, and credit score. Create a budget that accommodates a home loan EMI without compromising on other essential expenses.
2. Saving for a Down Payment: Accumulating funds for the down payment is crucial. This usually ranges from 10% to 25% of the property value. Consider setting up a dedicated savings plan and exploring options like fixed deposits or mutual funds for better returns.
3. Understanding Home Loans: Research different home loan options and compare interest rates, tenure, and terms offered by various banks and financial institutions. Aim for a loan amount that you can comfortably repay over the years.
4. Location and Property Selection: Choose a location that balances affordability with convenience. Proximity to workplaces, public transport, and essential amenities should be considered. Additionally, evaluate the potential for future growth and appreciation in the area.
5. Legal and Documentation: Ensure that the property has clear titles and all necessary approvals from local authorities. Consulting with a legal expert can help avoid future disputes and legal complications.
6. Insurance: Consider getting home insurance to protect your investment from unforeseen events like natural disasters, theft, or accidents.

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