Are you financially ready to buy your first house?

Ravi, a software engineer from Hyderabad got married five years back to Swathi, a banker. Ravi and Swathi are now 34 and 31 years old, respectively. Two years into their marriage, they decided to buy a house which cost them Rs 54 lakh, funded by a joint home loan of Rs 45 lakh. At the time their combined salary was Rs 1.1 lakh (Rs 65,000 and Rs 45,000, respectively). Fast forward to the present and the couple is expecting their first child in a few months. Swathi has decided to be a stay-at-home parent to take care of the child, but it is not going to be an easy road ahead. As they transition from a double-income-no-kids household to a single-income household with a child, they are worried about servicing the EMI which is about Rs 42,500. "At the time of buying the house, we did not think about such a situation arising. We exhausted all our savings in the down payment while buying the house," said Ravi. This couple is not an aberration to the norm; owning real estate is considered a proud purchase by many households and is normally funded through loans. While a house is one of the biggest investments you make, it may not always be the best investment. You need to assess this asset class on the metric of affordability and future serviceability of any loan you take. Here are a few factors that should help you decide if you are ready. Your finances Unlike financial assets that are liquid (you can redeem your mutual fund units and realize the money in a few da

This article was originally published on August 19, 2020.