Why taking a home loan in your 20s doesn't make sense?
3 February 2023
"It is always said how important it is to get a good start in life, but they're not always very helpful at...."
.....specifying just how one goes about getting this critical early advantage. It's everyone’s dream to own a house or a flat and call it a home. Having your own house is really considered a symbol of success.
Although in financial terms, owning a house is actually a liability. Though a lot of people consider buying a house as an investment, and the house an asset, it does not put money in your pocket. You can refer to our previous blog to read why a house is not an asset and to know how to identify a real asset.
No one can deny the fact that owning a house gives us a sense of security. For a lot of people in Bharat, a home is a distant dream. A person works whole life and lives a frugal life with an aim to own a house someday. Handing over the keys to your home to your parents is a way a son tries to tell them, he’s made it. No one can deny the emotions associated with a home and the security it provides us with.
Although in the early days of your career, you might want to get hold of your emotions and work towards achieving financial independence first. Buying a home can be kept in your financial bucket list when starting your career. It can be hard to delay this but if you can swallow this bitter pill then you may be able to get financial independence a lot earlier.
Renting a house can be a lot cheaper. If you live in Tier-1 cities in Bharat, then the rental yields are like these;
Bangalore - 3.45%
Mumbai - 2.44%
Ahmedabad - 3.22%
Chennai - 3.10%
So, if the rent is the same as the EMI, even then it does not make sense to own a house as you may not want to retire in that home. You can stay in that 50 lakhs flat by paying a lot less than the price tag.
The job that you start your career with is definitely not the job that you will be working in after 5 years. Like the job, the location of the job is also not static. You might have to shift to another city altogether. Then the EMIs for the house you bought will become an additional expense and might affect your monthly budget. Also, selling a property is not as easy as it seems. You would first need a broker to find out potential buyers for you, and it takes a considerable amount of time to sell that house. And if luck is not with you, you might end up selling in a slowing market and you might not get the return you had expected.
It depends a lot on your family and your partner which house you buy. You might be planning your budget based on the salaries of both you and your partner. If at any time you want to get separated, again the house becomes a point of contention. In the early years, one cannot predict what will happen in a relationship, it might not be a successful one.
Then should you never buy a house? Well, no. No one can tell you the right time to buy a house except yourself. When you feel you are in the right position in your life or you want your kids to grow up in that house or you want to get old with your partner in that house, it is only you that can decide the right time.
It would be best if you can consider the drawbacks of taking a home loan very early in your career and consider all other factors before buying your dream home. Taking control of your emotions would get you in a better position to take good financial decisions, which would in turn help you become financially free a lot early than your peers.