Need Expert Advice?Our Gurus Can Help

Ramalingam Kalirajan |11089 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Feb 11, 2026

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Feb 10, 2026Hindi

Hi, I'm looking for a suggestion and ideas here about my step is correct or wrong? Context: We booked a flat for self use. is this step correct or wrong? We both are working professionals with a single kid aged 3.5yrs Combined Salary: 2.6L per month Savings: Monthly SIP: 53K Recurring Deposits: 55K - 2 Term plans, Parent Health Insurance, 2 LIC Policies, Emergency Funds Emergency Funds so far: 1.5L(Stocks) + 60K (RD) Loans: Car Loan: Rs.17000/- -- Tenure: 1Yr Remaining Land Loan: Rs. 19000/- -- Tenure: 7yrs Remaining Monthly Expenses: 30K At this time, we booked an flat at 94L with 20% down payment of my EPF amount. Where Bank loan sanctioned upto 90% of the flat cost with monthly Emi of 70K. is this a good step to take dream home? Kindly suggest.

Ans: You have taken a big and emotional step. Buying a self-use home for your family is always special. With your income level and disciplined savings habit, you have clearly planned before acting. That itself is a positive sign.

Let us evaluate this in a structured way.

» Income vs EMI Position

– Combined salary: Rs. 2.6L per month
– Proposed Home EMI: Rs. 70K
– Existing EMIs: Rs. 17K (car) + Rs. 19K (land)
– Total EMI outgo will be around Rs. 1.06L

This means roughly 40% of your income will go towards loans.

– This is slightly on the higher side but still manageable.
– After one year, car loan will close. That will reduce pressure.
– Main risk is interest rate increase. If rates go up, EMI or tenure will increase.

From a cash flow angle, this decision is not wrong. But it requires discipline.

» Savings and Liquidity Position

You are doing very well here:

– SIP: Rs. 53K
– RD: Rs. 55K
– Monthly expenses: Rs. 30K
– Emergency fund: Around Rs. 2.1L

Concern area:

– Emergency fund is low compared to your commitments.
– After new EMI, your monthly fixed commitments become high.

You should maintain at least 6 months of total expenses including EMIs. With new home loan, that buffer should be stronger. Presently it is insufficient.

Before taking possession:

– Increase emergency fund aggressively.
– Do not depend on stocks as emergency fund because market can fall anytime.

» Use of EPF for Down Payment

Using EPF for self-occupied house is allowed. But remember:

– EPF is long-term retirement money.
– Once withdrawn, compounding stops.
– Your retirement planning gets slightly delayed.

It is not wrong. But now you must compensate by increasing long-term investments later.

» Overall Financial Load

Your current structure:

– 3 loans running
– 2 LIC policies
– Term plans in place (good decision)
– Health insurance in place (very good decision)

I would suggest:

– Review LIC policies carefully. If they are traditional policies with low returns, consider surrendering and reinvesting into mutual funds aligned to long-term goals.
– Insurance and investment should be separate.
– Continue SIPs. Do not stop equity investing because of home purchase.

» Child’s Future Planning

Your child is 3.5 years old. Education cost after 15 years will be very high.

– Home EMI should not disturb education goal investing.
– Continue SIP and gradually increase every year.
– Step-up investing whenever salary increases.

» Stress Test Scenario

Ask yourself:

– What if one income stops for 6 months?
– What if interest rates increase?
– What if medical emergency happens?

If you can handle these situations with savings and insurance, then decision is safe.

» Emotional vs Financial Decision

For self-use home:

– It gives stability.
– It gives emotional comfort.
– It protects you from rent inflation.

Financially, it stretches you moderately but not dangerously. Because your income is strong and expenses are controlled.

» What You Must Do Now

– Build emergency fund to at least 6–8 months of total obligations.
– Close car loan and then partly prepay home loan or increase SIP.
– Increase SIP every year by minimum 10%.
– Review LIC policies and restructure if required.
– Avoid taking any new loan for next 3–4 years.
– Keep lifestyle simple till cash flow stabilises.

» Finally

Your decision is not wrong. It is slightly aggressive but achievable. With your earning capacity and disciplined approach, you can manage this well.

A house becomes a burden only when planning is weak. In your case, planning is visible. Now execution discipline is important.

If you strengthen emergency corpus and continue long-term investments, this dream home can become a strong foundation for your family’s future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

Asked on - Feb 11, 2026 | Answered on Feb 12, 2026

As we start possession at new home. We are planing the house EMI to be paid yearly with one extra and increase EMI by 7.5% annually. So that we shall close Home loan by 10years. We shall plan to shift our current jobs by an year. so that our net take home can increase for further needs like emergency funds, Kid Education. No plans to increase SIPs. This is how we planned. Do let us know how we can plan better and do early closure of home loan.

Ans: Your follow-up plan shows maturity and intent. You are not only buying a home, you are also thinking about control and early freedom from debt. That mindset itself is a big strength.

» EMI Increase and Extra Annual Payment

– Increasing EMI by 7.5% every year is a healthy move.
– Paying one extra EMI annually will shorten the loan meaningfully.
– Closing the home loan in 10 years is achievable with this approach.

This is a disciplined and sensible strategy, provided income remains stable.

» Priority Check: Loan Closure vs Safety

– Aggressive prepayment is good, but safety comes first.
– Do not rush all surplus only into home loan.
– Emergency fund must reach minimum comfort level before heavy prepayment.

Early loan closure should not come at the cost of liquidity stress.

» Job Change Plan

– Planning a job shift to increase income is positive.
– But job change always carries short-term uncertainty.
– Avoid committing higher EMIs until job change stabilises.

Once income visibility improves, then accelerate prepayments confidently.

» Decision on Not Increasing SIPs

– Holding SIPs at current level is acceptable for now.
– Do not stop SIPs under any condition.
– Once car loan ends, review and redirect that EMI either to SIP or home loan.

Over time, balance between asset creation and debt reduction is important.

» How to Plan Better for Early Closure

– First 12–18 months: focus on emergency fund build-up.
– After car loan closes: redirect that EMI fully.
– Use annual bonuses or increments for part-prepayment, not lifestyle upgrade.
– Keep LIC policies under review and restructure if they are not serving protection purpose efficiently.

» Finally

Your approach is structured and realistic. The plan to close the loan early is good, but pacing matters. Stability first, then speed.

If you protect liquidity, keep investments running, and increase repayments only after income visibility improves, you can enjoy your home without financial pressure and still meet long-term goals smoothly.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.