Home truths

Home truths

Real estate: If you are young and planning to buy a home on a single income, Mala Ashok has some advice for you.

Home truths

If you are young and single, you might have noticed that it is not easy to get landlords to rent their places to you. In some metros like Mumbai, parents are required to co-sign the lease of their offspring as guarantors.

This practice is not only demeaning but also discriminating. However, it does continue and many young single people will do well to consider ownership. With the apartment scenario bustling with new constructions, the choice is unlimited.

If you can get all the paperwork done, put down the down payment, and qualify for a home loan, you can start planning the move! Indeed buying a home doesn’t have to be off-limits for single people.

Challenges ahead

But before you get ahead of yourself, remember buying a home on your own comes with its own challenges, particularly when the global economy is fragile. Research says that more single women than men opt for home ownership. With the slowdown in the economy, there is a corresponding slowdown in home purchases by singles but the desire is still there.

So why do singles hesitate to buy homes and should they? Well, the obvious reason is that as a single person, you have only one income to support the purchase and pay the EMI, which adds extra risk if job security becomes an issue.

So, it’s important to buy the right home and be prepared. You would do well to start small if it’s your first home with room to trade up, should you become better off financially or become a twosome.

How much EMI?

Most first-time buyers, even if they are single, tend to have a big wish list that their budgets can’t or shouldn’t support. So how much can you comfortably spend on your EMI? 

The rule of thumb is that your EMI should not exceed 30 per cent of your gross income and the total loans you have (i.e. car loan, home EMI, credit card balances) should not exceed 40 per cent of your income.

More importantly, it is best to think and act conservatively within your budget because as a first time home owner you may not be prepared for unexpected expenses.  One good way to budget for home ownership is to look at what you were paying as rent. You may have factored in some breathing space in your personal finances while paying rent. 

So, ideally you should be able to afford the same amount as a home loan. And yes, the benefit of this is that you are now building equity in your asset. Don’t let your single freedom in anyway imprison you from the dream of buying a home.