Home Loan and House Buying- What We Did Right and What We Did Wrong

Like many we grew up believing buying a house is one of the major life goals and if you fail to achieve it you are a failure one way or the other. For both of us it was tied to something or the other from our childhood. A few years back when we found ourselves with a more money than we were used to we decided to take a look at few of the flats being constructed around. When we started it was just to get an idea. We actually ended up buying our house within a week of stepping out to see the very first house we had seen.

By the time we got possession of the house it was time for us to move out of the city once again and we are currently looking for a tenant. Our reasons for buying were far different than now, at that point of time we thought one of the parents would live there thus freeing up the rent we would eventually pay. They shifted out even before us and we now have two rents and an empty house.

The logic might not sound that convincing but at the time it was what seemed like the right thing to do. Even if I do doubt whether we did the right thing in buying a property when we could have clearly done without it, there were undoubtedly things we did right. These very things have helped us in equating our loan and maintain a consistent savings rate as well as a lifestyle which can easily take care of minor emergencies without dipping into our funds.

What we did right

Since this is my blog I do believe in recounting my good decision than the embarrassing ones, so below are the things we did right.

We bought a house we could afford

Home loan
Access to our flat when it was still under construction

It is pretty easy to be swayed by shiny things which builders sway in front of you , being in a profession where you have seen how these things get processed helps in keeping the resolve but I have seen people buy houses they clearly cannot afford.

Remember if the bank tells you, you are eligible for x amount of loan it does not mean you can afford that loan. It does get easier as the time passes but if you enjoy being slave of the bank where you keep on working to repay back the loan go ahead.

We were clear on what we could afford and also what were our deal breakers. We wanted a gated community where we would feel safe about our parents living. A flat suited our needs, as long it was well ventilated had decent amenities and proximity to transport options. Anything above that be it a zen garden or a swanky squash court was not our requirement.

We stuck to our figures and ended up spending less than half of what most of our colleagues did around the same time. Result was we had a shorter loan with a smaller EMI. This freed up capital which we could park in our OD account and thus equate the loan in less than 3 years.

We researched the interest rates before we committed to a bank

We have a relative who works in the banking sector and his only advice to us for loans was to go with the bank which offers you the lowest interest rates. Nothing else tops that and today we are reaping the benefits of that decision. A lot of people take loans from trusted advisers (?) or convenient banks who jump at the chance of lending you money.

These banks charge higher rates and for good reason they would probably finance a few unreliable properties as well.

Our choice was the nationalized SBI, with lowest interest rate and one of the best loan accounts we have heard of.

Right bank got us the right kind of loan account

We can only claim half of the credit for this, we just chose the bank and like most others decided we would put in regular top up payments to reduce our principle. Imagine our surprise when a colleague educates us about a loan account type where we don’t have to part away with the money but still enjoy 0% lending rate.

This is the MaxGain Loan account of SBI which is what I believe they register all loan accounts right now. You can read in detail about the account and how we leveraged it to our advantage in this post.

We maximized our EMI and reduced the tenure

We did this before we knew we had the overdraft facility and I believe it did help us out a lot. If we had not been able to equate the account (shit happens all the time) we would have still been done before we were 40. This also meant that once we were paying back at an accelerated date especially when we did start putting in the extra amount.

I am still wondering should we have done it differently, i.e. taken a longer loan and just matched the emi amount by putting in extra each month. Still I believe our success had a lot to do with the fact that we were never going to pay installments throughout our life especially as the interest portion is off the roof for longer loans.

We were consistent and focussed

It is nice to want it but not same as to work on it. The ‘it’ for us was the urge to be debt free and be able to call our home truly ours. We put every penny we could spare after our requirements and a minimal surplus in the OD account. Every bit even 5000/- a month make a big difference down the line.

What we did wrong

We did not negotiate enough

We are pretty straightforward people and negotiations make us uncomfortable even now. You’s be surprised to see what we do every day if you realize we hate negotiating. A friend of ours got another flat in the same block for almost the same prices but with a lot of additional benefits like a corner flat, modular kitchen (which isn’t coming in but the builder probably will adjust the price) etc. They also managed to convince 3 other friends and thus landed a free parking which we paid a decent sum for.

It is fairly easy to feel down after hearing about all of this but we realized we would not have managed to convince people to buy flats because we are far more private. Still I believe we would have had a better deal if we had negotiated a bit more.

We did not research the details of our loan early enough

We had already paid over 15 installments till our colleague enlightened us about the virtues of our loan account. Every penny we were saving in our regular savings account till then was earning us at best 6%. The same amount when parked in the loan account would have saved us 10.25% (which was the interest at that point of time) while helping us equate the loan even quicker.

We kept money separate

We keep a separate account of our side hustle money which we use to see the world and occasionally buy ourselves some luxury items like those recliners. Since our overdraft did not allow us to use the money we had parked before we had possession of the house we kept the money separate. Our fault was not pushing it in immediately when we got access to the account.

Some might say that the fact we spent on travel and occasional luxuries means we missed the mark. We believe in living our lives, while most people call us cheap or simply too miserly we don’t mind spending on things we love like travel (we backpack obviously). We understand the privilege of seeing the world when my legs can haul me up those steps and I can sleep in the bamboo huts. I can create lacs if I invest it all right now but I won’t be younger than 30 again and doubt I’ll have the same energy ever again.

We must have probably made a few more mistakes or done things we didn’t realize would help us get closer to our goal- owning our house before we were past 30.Had it been a few months earlier we would have made it before both of us turned 30.

What do you believe are your good and bad decisions when you bought a house or took a home loan/Mortgage?

Frugal makes Life Easy- The C syndrome

I realized yesterday why being frugal makes your life easy. We work in relatively stress free job, where if we keep our ego and job pride aside we would have to worry about nothing. A good number of our co-workers follow this approach, but we are proud people who would rather work a bit more than be found lacking. As you can predict, this results in more stress than necessary and a few minutes ago I found out that the client would like to increase our working hours further more. Needless to say the new information as well as the workload quickly results in the C-syndrome.

The C-Syndrome

This C-Syndrome is not an actual physical ailment; instead it is what I call the problem which ails most CEOs and others with a C before their designation. You are probably suffering if you simply can’t seem to shut your mind off work. If you go back home eat, watch TV and then get on the laptop to work or for pleasure, all the while worrying about the next meeting or the paper you submitted today- you have C syndrome.

Last few days we have been constantly subjected to this, adding to this is the uncertainty and decision of making a major change in our life by changing jobs and becoming and expat. But I digress, getting back to how being frugal makes your life easy.

Yesterday as we sat down after some cooking and getting the kitchen is a better order I realized I was not worried about work or any other stuff while doing my chores. We did not have the time to discuss the subject over and over again which meant not creating a mountain from a mole. So where does frugality come in? We don’t have a household help, none. Most people hires help in one form or the other we prefer to do our own cleaning, cooking and washing. If we had a well-made home and already prepared food we would probably not had the mental break that was required.

Why no Help?

Our lack of help is not because we were forever trying to save money. It stems from our need of privacy and our love of sleeping as long as we want. The fact that a good maid would cost us upwards of 3000/- in big town for all our requirements also makes the decision easy. We have had maids coming in when we were living with our parents but I have forever believed if half the world can survive without maids I surely can. Now if the house is clean it is because one of our lazy asses cleaned it. If not we are the ones who have to live in it.

Almost everyone we know has a maid coming in to take the load of chores away and let people relax when they get back home. Most believe it benefits their lives and allows them to have more time for themselves and their family. I on the other hand have very recently realized that most of these people waste the said time in watching TV. I would rather prepare simple meals myself, move a bit to clean our house and save some early morning sleep. For me sleep equals a better life and occasional cleaning doesn’t reduce its quality. I love cooking and even if I was filthy rich I would probably like to cook myself.

How Frugal makes us better

We are pretty new to actually managing money. We have been decently good with our finances (shown by our home loan equating) but we were yet to take the next step and optimize everything. The best part is it requires some number crunching and both of us love numbers. We have been sharing spreadsheets since forever, be it for a travel plan or how much I will earn when I become a certain age.

As we move forward in our attempts to be more efficient and frugal we hope to find better ways of not just destressing but also learn how it can make us better. For starters we know that consuming less means we are better dwellers of the planet. We also know that by not taking unnecessary loans or not buying more than our pockets allow we will in long turn be better parents as we become better planners today.

Do you believe your frugality makes you better?