If you have decided to buy your dream home, here is what you can do to take advantage of the current economic environment.

• The realty market is fiercely competitive. With a large number of builders competing with each other to get your attention (and your money), there is a wide range of choices available; not only in terms of property but also price, thus making it a buyer’s market. As a smart buyer you should negotiate and negotiate and then negotiate some more till you get the best deal.

• It is advisable that you choose ready-to-move-in property as it means lower risk for you. Or else you can go in for those builders who have tie-ups with banks. With many builders the tie-up entails 25% down payment and 75% loan from the bank. So, when you make 25% down payment you enter into an agreement with the builder and the bank, and your interest starts only when the flat is ready. In case such tie-ups are not available then only trust those developers who have proven track records of completing and delivering projects in time.

• Given in the current global financial scenario, be prepared to make down payments in the range of 20-25% and not 15-20% (which was the case till recently). In a way higher down payments make banks happy and it also puts you in a better position to negotiate with the lenders. You get better interest rates and therefore pay lower EMIs.

• Go window shopping for lenders, shortlist four or five, and get into negotiation mode. Now the big question is whether to go in for fixed or floating rate. Remember loan interest rate is not a one-time decision; it has to be reviewed periodically say every 6 months. As a new borrower you are advised to opt for a floating interest rate loan because those loans are linked to the bank’s Benchmark Prime Lending Rate (BPLR) and go down when downward revision happens. In the current scenario, floating rates make the best sense as rates are expected to go down in the immediate future.

• Rope in your spouse to get the maximum loan possible. Opt for the longest tenure possible, leaving enough wiggle room in your income to accommodate a hike in the loan rates. This is not likely in the near future but it is always better to be prepared.

• Man knows little of what fate has in store for him. When you take a home loan, it is on the basis and assumption of continuing income. We run into all kinds of risks in our daily life. Accidents and health issues like heart attacks, stroke, paralysis, kidney failure, and other physically crippling ailments can cause loss of income or, in some cases, even your life. Housing loans are a long-term liability. This is why when you take a home loan; it is advisable to take a life insurance and critical illness policy. Life insurance policies provide monetary benefit in case of an unfortunate incident like death and ensure that your family members inherit your home not your home loan. Critical illness policy will take care of the home loan liability if your income gets interrupted due to unforeseen, unavoidable circumstances which such conditions may create. That will be one less thing for you to worry about while you are under severe stress. Best of all, most banks will be happy to finance the one-time premium payable for both policies, enabling you to get this protection at a small addition to your regular EMI.

Protect yourself, protect your home. Insure your home along with the belongings. Every penny is worth spent here; therefore make these expenses part of the cost of buying your home.

Mr. Patel retired after a very successful career in a private sector bank. He held his head high all through his career and now wants to do the same in future also. His only daughter Supriya got married to Anshul working with a leading American investment bank in Mumbai last year. Being the only child, the wedding was a very grand occasion. The entire cost of the wedding was around 40 lakhs which included his daughter’s jewelry, the car he gifted to Anshul, and other normal wedding expenses. He stays at Kandivali and the cost of his flat is around 60 lakhs.

Mr. Patel used up almost all his savings he had done till date in marrying Supriya off. Mrs. Patel, a house wife, also contributed around 6 lakhs that she had saved over the years. Now, the only money Mr. Patel has is around 5 lakhs in his bank fixed deposits and Rs. 10 lakhs in his PPF & EPF accounts. Added to this, he will get around Rs. 6 lakhs as gratuity from his company.

His worry now is how to arrange for his monthly expenses, somewhere between Rs. 25,000 to Rs. 30,000. He also wants to take his wife to Vaishno Devi and Haridwar - a promise he had made to his wife, to be kept once Supriya’s wedding was done.

The traditional option he would have had was to rent out his flat and move with his daughter or move into a smaller flat. Not any more.

Citizens such as Mr. Patel can now opt for a reverse mortgage. A reverse mortgage is where a senior citizen can mortgage his/her primary residence with a bank and receive the mortgage amount as periodic payments, be it monthly, quarterly, half-yearly, or yearly. So, Mr. Patel visited a few banks and found two options from most of the banks. In the first option, he would qualify for 90 per cent of the realizable value of his property at the end of his chosen tenure. This amount would be paid to him in monthly EMIs for the chosen tenure.

In the second option the loan amount would be 50 per cent of the present value of his property.

He went ahead and did a little calculation to find out which of these options would suit him better.

In the first option, he assumed the property rates to grow at rate of 8% per annum, which is the current risk-free rate. All other conditions remaining constant, he was getting an amount of Rs. 41,329. His calculations yielded only Rs. 38,686 on option 2. If he did the same calculation taking the rate of return on real estate at 12 per cent he got the EMI amount of Rs. 71,313, which is way above what he would get in Option 2. Choosing to go for the reverse mortgage helped Mr. Patel to live with his head held high for the rest of his life. With the amount of money he got from his gratuity, he took his wife on a pilgrimage of all dhams in India. He gifted all his fixed deposits to his daughter after the birth of her first child.