Weak CIBIL Score
The interest rate on home loan is also associated with the risk profile of the borrower. So a weak CIBIL would mean higher interest charged on the loan and the EMI per month would also go up. Normally a bank/Financial institution avoids allowing loan with a bad CIBIL score but even if you get it somehow, the cost of borrowing would be heavy burden while repaying the loan. It is better to wait till the credit score improves by exercising a disciplined financial transaction.
It is totally incorrect to take the burden of home loan while earning is insufficient to pay back the borrowings. People do such act when they assume that they could get the income support by renting the home bought on loan. Such planning can be disastrous if there is slight variation in the whole arrangement. It is better to say no to the home buying plan till the income level improves to a comfortable level.
Location Not Stable
If the place of living is unsure then it is not a smart move to buy a home just to stay for a short period. In such a situation the buyer can barely sell a property at a good price. The short term capital gains tax would be applicable on property sold within 3 years of buying. Even if one decides to rent it while shifting elsewhere then managing the property from a different place would be a very complicated task. The home buyer should wait for buying a property till the place of living is fixed for long duration.
When the Real Estate Market Is Risky
It is not a smart move to put money when the price of the properties are falling and the overall economic condition is risky. Builders too suffers badly from the slowdown in economic conditions so the risk of late possession and dispute in a transaction can spoil the whole investment plan. It is better to delay the buying decision till the market revives back to normal.
When the Interest Rate is expected to Correct Sharply
A correction in the interest rate could save lots of money in the long term while one decides to take a home loan. Due to the high amount required and long repayment duration of the home loan, a small change in the interest rate can reduce lots of repayment burden.
Buying Due to Fashion
Now days people indulge in fashion of acquiring a new property while overlooking necessity and offer's negativity. A herd mentality must not be followed while buying a home with the hard earned money. Fashion buying increases the cost of purchase as a seller normally adds premium on the price due to increased demand.
It is better to delay and settle with a less profit than to hurry and make a loss in the capital invested. So it is necessary to properly analyze the deal while buying a home. A good home buyer is one who takes time to say "yes" whereas does not hesitate to say "no" while finalizing a deal.
About the author:
Amit Sethi is an MBA (Fin) graduate and a Financial Consultant. He has spent 10 years in Equity research, Stock broking and Financial Consultancy Sector. He can be reached at firstname.lastname@example.org