Hi sir, i am 38 year old living in delhi in a rented house, i am into business and i earn approx 1.5 lac per month, my wife is not working and have two girls 4 years and 9 years. One auto loan is going on with emi of 13 k since jan 23 and remaining for 19 more months. Started sip from last year for 8 thousand every month,in total 1.3 lac in mutual funds and i have equity of approx 6.5 lac in bluechip companies. I have kept emergency fund of 2 lac in cash, 5 lac in my and my wife bank account each. My monthly expense is around 1 lac excluding emi. I have a health insurance for entire family with cover of 10lac and a top up policy of one crore.
My question is, i want to buy a home should i go for home loan of 50 lac with down payment of approx 8 lac or should i wait to collect more corpus before taking a home loan and how can i maximise returns and increase savings?
Ans: You are on the right track in many ways. But buying a house with a Rs 50 lakh home loan now may not be your best financial decision. Let's assess your situation and goals from a 360-degree view.
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Monthly Cash Flow and Savings Strength
Your income is Rs 1.5 lakh per month.
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Your current expense is Rs 1 lakh per month.
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Auto loan EMI is Rs 13,000. That’s a long-term liability till mid-2026.
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Your effective savings are about Rs 37,000 monthly, if we include EMI as a fixed outgoing.
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This savings rate is just around 25% of your income.
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Ideally, you should save at least 35% to 40% of income at this stage.
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You have Rs 1.3 lakh in mutual funds through SIPs. That’s a good beginning.
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You also have Rs 6.5 lakh in equities. This adds to your long-term wealth pool.
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Emergency fund is well managed — Rs 2 lakh in cash and Rs 10 lakh in bank savings.
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But too much idle money in savings account gives low return.
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You can restructure some of this idle amount for higher growth.
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Health insurance is well set — Rs 10 lakh + Rs 1 crore top-up. Very thoughtful decision.
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Home Loan Decision — Evaluate Carefully
You plan to take a Rs 50 lakh loan with Rs 8 lakh down payment.
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That means property value may be around Rs 58 lakh or more.
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EMI on Rs 50 lakh loan for 20 years may be approx Rs 45,000 to Rs 48,000 monthly.
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This EMI is 30%+ of your monthly income.
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Adding EMI to your current expense of Rs 1 lakh will take total outgo above Rs 1.45 lakh.
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That leaves little room for savings, emergencies, or business volatility.
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Your business income may fluctuate. Loan EMI remains fixed.
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That can cause cash flow strain in any weak business month.
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You will also have to manage property maintenance, taxes, and house setup costs.
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After buying the house, your liquidity will be tight.
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You will have very limited flexibility to grow business, invest, or manage kid’s goals.
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Therefore, taking a big loan now is not suitable.
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Recommended Path — Strengthen First, Then Buy
Hold the house purchase for now. Build more financial strength first.
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Target at least Rs 20 lakh in financial corpus before buying house.
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That will make the down payment easier and lower the loan requirement.
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Smaller loan means lower EMI. That keeps your cash flow balanced.
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Focus more on building mutual funds portfolio over next 3-4 years.
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Increase your SIP gradually every 6 months. Even Rs 1,000 to Rs 2,000 increase matters.
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Keep mutual fund investments via regular plans through a Certified Financial Planner.
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A planner will guide based on your goals and risk.
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Avoid direct mutual fund route. You will miss professional advice and tracking.
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Regular plans via planner offer better long-term discipline and help in market cycles.
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Also avoid index funds. They are passive and do not beat inflation over long periods.
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Actively managed funds offer better returns with risk-adjusted strategies.
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Choose diversified equity funds across flexi cap, mid cap, and hybrid for balance.
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Review the equity stocks you already hold. Avoid overexposure to one sector.
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If these stocks are idle or underperforming, shift them to mutual funds gradually.
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Use your wife’s savings as well to build long-term assets.
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Joint SIPs or funds in her name can help reduce tax in future.
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Kids’ Education — Start Dedicated Planning Now
Your daughters are 4 and 9 years old. Time is on your side.
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School and college costs will rise sharply due to inflation.
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Plan Rs 25 to 30 lakh for each child over next 10 to 15 years.
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Begin a separate SIP for children’s education.
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Start with Rs 5,000 monthly. Increase every year with income.
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Keep this in a growth-oriented fund with child-specific goal.
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Keep insurance separate from investments. Don’t mix them.
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Avoid child ULIPs or education endowment policies.
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For safety, consider taking a term plan of Rs 1 crore for yourself.
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Term insurance is cheap and gives peace of mind.
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Emergency Fund — Optimise Returns
You have Rs 2 lakh in cash and Rs 10 lakh in bank savings.
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That is excess idle balance in savings account.
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Move at least Rs 6 lakh to a short-term debt mutual fund or arbitrage fund.
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This gives better return than savings bank interest.
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Keep Rs 2 lakh in cash and Rs 4 lakh in bank savings for any urgent needs.
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Debt funds offer liquidity and 5-6% returns post-tax.
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This strategy keeps your emergency fund safe and productive.
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Business Goals — Don’t Ignore Capital Needs
You are self-employed. Business stability affects entire family.
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Set aside at least Rs 3 lakh to 5 lakh as business contingency buffer.
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This buffer helps you manage cash cycles, bulk orders, or temporary slowdowns.
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Use a liquid fund or sweep account for this buffer.
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Don’t touch this for personal needs or investments.
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As your business grows, increase this buffer proportionately.
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Review business income, cash flows, and margins every quarter.
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If income becomes stable, then only think of buying property with clarity.
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Real Estate — Don’t Rush
Avoid pressure to buy house just because rent is going out.
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Rent is a known cost. EMI is a fixed liability.
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House purchase brings big responsibilities like maintenance, tax, and low liquidity.
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If you move house or city due to business, house becomes a burden.
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Instead, grow your financial net worth. That gives better freedom.
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You can always buy a house 3-4 years later with less loan.
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That also gives you better bargaining power.
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Monthly Budget Review — Create Savings Habit
Review expenses monthly with your wife.
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Track wasteful spends. Avoid lifestyle creep.
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Try to bring expenses below Rs 90,000 per month.
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Save the extra in SIPs and emergency buffer.
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Discuss financial goals openly with your spouse. Involve her in small investment steps.
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Make goal chart for house, kids, and retirement.
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This brings alignment and motivation.
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Final Insights
Don’t buy house now. Strengthen financials first.
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Maintain SIP discipline. Gradually increase monthly SIP.
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Build Rs 20 lakh corpus in next 3-4 years.
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Only then take smaller home loan for balance amount.
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Don’t break equity or MF holdings to buy house.
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Use Certified Financial Planner to design full plan for family goals.
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Avoid direct funds, index funds, or mix insurance products.
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Separate insurance, investment, and emergency funds clearly.
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Use wife’s savings also to build joint future.
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Invest with goal-based planning, not just product-based decision.
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Stay patient and consistent. You will achieve house and kids goals peacefully.
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Best Regards,
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K. Ramalingam, MBA, CFP,
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Chief Financial Planner,
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www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
