There is a popular opinion that a falling market is a good time to invest in mutual funds. With 2020 being a very unique year, one is bound to have second thoughts on how they spend and invest their money. And if it is a significant life decision such as buying a home, much deliberation ensues. We find out if the time is right to buy a home.
According to a report in the Financial Express, this could in fact be a conducive time to buy a home. There are three reasons simply put:
- Experts predict the real estate market to rise in the future. If you see the home as a long-term investment, you can expect a higher rate for a home you buy now.
- Due to uncertainty in the market, buying a home is slightly cheaper at present. The cyclical pattern of buying homes has been affected due to investor sentiment and restructuring of finances. If you scout around for homes, you could be able to strike a better deal due to low demand, but available supply.
- If buy a ready-to-move-in home, you will save on rent. In fact, home loan interest rates have fallen recently. For all you know, if you foresee a stable income and have already saved up for a down payment, you could be in the sweet home buying spot.
Home loan interest rates
Interest rates on home loans have been linked to an external benchmark since October 1, 2019. All scheduled commercial banks, barring some regional and small finance banks, had been directed to do this by the Reserve Bank of India.
“The trajectory of home loan interest rates will primarily depend on the policy rates changes by the RBI. The policy rate, in turn, depend on multiple factors. Domestic [read India’s] macroeconomic condition, actions by major Central Banks in the world, inflation, crude prices, broader market interest rates and such,” says Ratan Chaudhary, head of Home Loans at Paisabazaar.
He suggests that if you are planning to buy your dream home through a home loan, you shouldn’t wait for a further fall in interest rates. It is important to know that when you pick interest rates for your home loan, a floating one would be beneficial, instead of a fixed one. “Since the interest rates are linked to external benchmarks, any reduction in the interest rates in future reflect on borrowers’ EMIs if they have floating interest rates on home loans.”
According to the Live Mint, interest rates have been falling since the lockdown had begun. This is an opportunity if you are a new home loan borrower. Pro tip: You could save on income taxes on your interest rates and principal amount as well.