A Case Study: How One Family Purchased Their Dream Home in Mumbai

A Case Study: How One Family Purchased Their Dream Home in Mumbai

December 23, 2024 By: sonimoney0 comments

Purchasing a home in Mumbai, one of the most expensive real estate markets in the world, can seem like a daunting task for many families. However, with the right planning, research, and financial strategy, it is absolutely possible to buy your dream home in this vibrant city. In this case study, we explore how one family successfully navigated the process of purchasing their dream home in Mumbai, from the initial decision-making to securing a home loan and finally moving into their new home.

This story highlights key steps and valuable lessons that can help prospective homebuyers in Mumbai make informed decisions.

The Family: Meet the Sharmas

The Sharma family, consisting of Rajesh (a 35-year-old IT professional), Priya (his 32-year-old wife, a teacher), and their two children, were living in a rented apartment in Andheri West. Over the years, they had built up savings with the goal of eventually purchasing their own home in Mumbai. Rajesh and Priya had always dreamed of owning a spacious apartment in a well-connected locality, but the high property prices in the city seemed like an insurmountable obstacle.

Step 1: Understanding Their Budget and Financial Health

Before embarking on their home-buying journey, Rajesh and Priya took a step back and evaluated their financial situation. They:

• Checked their credit scores: Rajesh had a credit score of 780, which was excellent, but Priya’s score was slightly lower at 680 due to a missed payment on a credit card a few years ago.
• Calculated their savings: They had saved up a down payment of 20% of their target home price, amounting to ₹25 lakhs.
• Reviewed their income: Rajesh earned a monthly salary of ₹1.5 lakhs, while Priya earned ₹60,000 as a teacher. Together, their monthly income was ₹2.1 lakhs.
• Cleared existing debts: They paid off a personal loan that they had been carrying for a few months, which improved their debt-to-income ratio.

Once they had a clear picture of their finances, they set a realistic budget for their home purchase. After researching property prices in various parts of Mumbai, they decided to look for a home in the suburbs, where prices were relatively more affordable compared to central Mumbai areas.

Step 2: Exploring Mortgage Loan Options

Rajesh and Priya knew they would need a home loan to make their dream of owning a property a reality. They started researching mortgage options, keeping in mind their financial situation and the amount they could comfortably afford in monthly installments.

Here’s what they did:

• Consulted with multiple banks: They approached several banks to compare home loan interest rates and terms. They spoke with both nationalized and private banks, as well as a few non-banking financial companies (NBFCs).
• Checked eligibility: They learned that most banks would lend up to 80% of the property value, with the remaining 20% being covered by their down payment. Since their combined monthly income was decent, they were eligible for a loan amount of ₹1 crore, which aligned with their target budget.
• Explored government schemes: The family also researched schemes like the Pradhan Mantri Awas Yojana (PMAY), which offers interest subsidies for first-time homebuyers. Since their family income was below ₹18 lakhs per annum, they were eligible for a subsidy under the scheme, reducing their effective interest rate.
• Fixed vs. Floating rates: They chose a floating interest rate loan, as they expected rates to be stable or decrease in the future. A floating rate offered lower initial interest rates compared to fixed-rate loans, which helped reduce their monthly EMI burden.

After gathering all the necessary information, they finalized a home loan with an interest rate of 8.5% per annum for a 20-year tenure.

Step 3: Choosing the Right Property

With their budget and loan pre-approval in hand, the Sharmas started searching for the perfect property. They had a clear idea of what they were looking for:

• Location: They wanted a home that was well-connected by public transportation (preferably near a metro station) and had good schools, hospitals, and shopping areas nearby.
• Size: They needed a 2-3 BHK apartment that would comfortably accommodate their growing family.
• Amenities: The property had to have modern amenities like a gym, playground, and security.

After visiting multiple properties, they finally found a newly developed 3 BHK apartment in Goregaon East, a suburb with excellent connectivity to the Western Express Highway and the Mumbai Metro. The project was under construction, with possession scheduled in 12 months, and it was within their budget of ₹1.25 crore.

Step 4: Finalizing the Deal

Once they decided on the property, the next step was to finalize the deal. The developer offered them a few flexible payment plans, and they were able to make an initial payment of ₹25 lakhs (their down payment) to secure the property.

They were also able to take advantage of the PMAY subsidy, which reduced their effective interest rate by 0.5%, saving them thousands of rupees over the loan tenure.

Step 5: The Home Loan Approval and Disbursement

With all the paperwork in place, the Sharma family submitted their final documents to the bank for approval. The required documents included:

• Identity and address proof (Aadhar Card, Passport, etc.)
• Income proof (salary slips, bank statements)
• Property documents (sale agreement, allotment letter)
• CIBIL score report

Within a week, the bank approved their home loan, and the funds were disbursed directly to the developer. The family signed the final loan agreement, and their dream of homeownership officially became a reality.

Step 6: Moving Into Their Dream Home

After waiting for a year for the construction to be completed, the Sharmas finally moved into their new home in Goregaon East. The house, with its spacious rooms and modern amenities, was everything they had hoped for. With their home loan EMI set at ₹85,000 per month, they were comfortably managing their monthly expenses while also saving for future goals.

Lessons Learned and Key Takeaways

1. Do thorough financial planning: Rajesh and Priya ensured that their finances were in order before applying for the loan. They cleared existing debts, improved their credit score, and understood their budget.
2. Research loan options: The Sharmas carefully compared mortgage loan offers, interest rates, and terms from various lenders to get the best deal.
3. Take advantage of government schemes: The PMAY subsidy helped them secure a lower interest rate, making their home loan more affordable.
4. Choose the right property: It’s crucial to choose a property that fits both your lifestyle and your budget. Prioritize location, size, and amenities based on your family’s needs.
5. Stay organized and patient: The home buying process can be lengthy and complicated, but staying organized and patient helped the Sharmas navigate the journey successfully.

Conclusion

The Sharma family’s journey to purchasing their dream home in Mumbai is a testament to the power of planning, research, and smart financial decisions. With the right knowledge and guidance, they were able to navigate the complexities of the Mumbai real estate market and secure a home loan that made their dream a reality.

If you’re on the journey to homeownership in Mumbai, visit SoniMoney World for expert advice on securing the best mortgage loan for your needs.