Sir, I am 53 years, planning to buy a flat in Bengaluru and expected possession of the flat is in 2026. I am having a cash of about 40 % of the total cost. I would like to avail loan from SBI. I would like to make entire (40 %) initial...

Sir, I am 53 years, planning to buy a flat in Bengaluru and expected possession of the flat is in 2026. I am having a cash of about 40 % of the total cost. I would like to avail loan from SBI. I would like to make entire (40 %) initial payments from my own sources and afterwards I plan to avail loan. Which one would be beneficial whether to go ahead with payment my from side or jointly with bank loan. This is my second housing loan and previous one has already been cleared.

Ans: Appopriate financial planning may be made , after studying bit more your individual finances, but broadly, you may take max home loan and put max of your own funds in FD. Service the home loan interest from FD interest. This stream will ensure interest service on one hand and housing loan repayment on the other, making the FD available as free after some years. Tax liability will be lesser than other availing 60% of the loan, if the loan is availed in joint name.

Ans: You deserve appreciation for your clear planning and thoughtful approach. Buying a house is an emotional and financial milestone. You have handled the decision with maturity. Many people rush into buying without evaluating long-term impact, but you are thinking in a structured way. That itself shows financial awareness. Let us now look at your plan from all sides before taking the final decision.

» Understanding your current financial situation

You and your spouse earn around Rs 3.6 lakhs per month together. Your rent is Rs 30,000, and you have an ongoing car loan of Rs 5 lakhs with an EMI of Rs 16,000. You are considering buying an apartment costing around Rs 1.1 crore.

You plan to pay Rs 60 lakhs upfront and take a Rs 50 lakh home loan. Your age is 36, and your wife’s age is 32. You have a young son who will enter Grade 1 next year. These details are important because your financial decisions should protect both long-term security and near-term liquidity.

Your current plan to pay more cash and take a smaller loan looks safe from an EMI perspective, but there are deeper aspects we should evaluate before deciding.

» Evaluating your liquidity and cash flow needs

Paying Rs 60 lakhs upfront means reducing your cash reserves significantly. Liquidity is the ability to handle emergencies, opportunities, and unexpected needs without stress. Once you use that Rs 60 lakhs, it will be locked in the property, which is an illiquid asset.

If in future you need money for your child’s education, medical needs, or job changes, you cannot easily access this cash. Selling a part of the house or taking a top-up loan is not immediate.

So before paying such a big portion upfront, ask:

– After paying Rs 60 lakhs, how much cash or investment will remain?
– Will you still have at least 12 months of emergency fund?
– Can you manage your son’s school expenses, insurance, and future commitments comfortably?

If the answer to these is uncertain, it is better to safeguard more liquidity rather than locking too much money in the property.

» Analysing the EMI burden and loan structure

A Rs 50 lakh loan for 20 years with today’s interest rate will result in a moderate EMI. Given your income level, the EMI will easily fit within 25–30% of your monthly income. That is healthy.

Even if you take a higher loan, say Rs 70–80 lakhs, your EMI will increase, but still stay affordable considering your joint income of Rs 3.6 lakhs per month. Your total EMIs, including the car loan, will not exceed 40% of your monthly take-home. That is a safe zone for salaried couples with stable jobs.

Therefore, it is financially sound to use the bank’s money more and preserve your cash instead of exhausting liquidity.

» Importance of balancing assets and liabilities

You should remember one key principle: financial security is about balance. If you invest everything into an immovable property, you become asset-rich but cash-poor. If any emergency or opportunity arises, you might need to borrow again at high interest.

It is better to keep at least Rs 25–30 lakhs liquid after the property purchase. You can park it in a mix of short-term debt funds, liquid funds, or fixed deposits. This will give you flexibility, confidence, and peace of mind.

Liquidity acts like an emergency shield for your family.

» The advantage of home loans beyond EMI comfort

Many people see home loans only as a burden. But actually, a home loan gives financial leverage and tax benefits. You can claim deductions for interest under Section 24(b) and for principal repayment under Section 80C.

These deductions reduce your taxable income every year. If you repay too much upfront, you lose these benefits. Keeping a reasonable loan amount helps you save taxes and maintain better cash management.

Also, home loans are the cheapest form of long-term borrowing. Interest rates are lower compared to personal loans or business loans. Using this opportunity smartly allows you to multiply your financial efficiency.

» Understanding emotional versus financial decision

Buying a home is an emotional decision too. It gives pride, comfort, and family security. But emotions should not override financial prudence. You are already paying rent of Rs 30,000 per month. So, if your EMI is around Rs 45,000–55,000, it is a natural extension of your budget.

However, if you drain all your cash for down payment, you will lose the comfort cushion. That can cause stress later if any job change, medical cost, or education need arises.

Emotionally, owning a home feels satisfying. But financially, keeping money accessible ensures long-term peace.

» Importance of emergency fund before property purchase

You have a small child and dependents. Therefore, an emergency fund is non-negotiable. Before you finalise the property payment, you must ensure you have at least 12 months’ worth of living expenses, EMIs, and education costs in liquid form.

This means at least Rs 12–15 lakhs should stay untouched even after the home purchase. This fund protects your family from unexpected job loss, medical emergency, or delay in possession.

If you invest everything in the property, you may need to borrow again in such situations, which brings back debt pressure.

» Evaluating child’s education and future needs

Your son will enter school next year. Education costs in Bengaluru grow quickly. Over the next few years, school and extracurricular expenses will rise. Later, college and higher education will need major funding.

Hence, setting aside some portion for his education planning is important. You can build this systematically through SIPs in diversified equity mutual funds over time.

If you pay too much cash for the house, your ability to start such SIPs will reduce. That delays wealth creation and future preparedness.

» Evaluating the cost of missed investment opportunity

By paying Rs 60 lakhs upfront, you lose potential compounding benefits that your money could have earned in diversified mutual funds or other investments. Over the next 15–20 years, that Rs 60 lakhs could have grown substantially.

On the other hand, the home loan interest you pay is much lower than the long-term returns achievable through properly managed investments. So, keeping some money invested can create parallel wealth while you also own your home.

It is about balancing both — not choosing only one side.

» Psychological comfort and risk tolerance

Some people sleep peacefully when they have less loan. Others feel safer when they have more liquidity. The right choice depends also on your comfort level.

If both of you feel emotionally relaxed by having less EMI, then paying slightly higher down payment is acceptable. But do not go to an extreme where you lose flexibility.

Discuss this openly as a couple. Financial harmony between spouses is very important when taking big decisions.

» Handling the existing car loan

You have an ongoing car loan of Rs 5 lakhs with Rs 16,000 EMI. It is better to continue this loan as per schedule. Do not use your cash reserves to close it early if it reduces liquidity. Car loans are short-term and manageable within your total income.

Focus more on managing your home loan structure efficiently rather than diverting funds to prepay smaller loans.

» Evaluating the best loan-to-value mix

The property cost is Rs 1.1 crore. You can consider paying around 30–35% as down payment (around Rs 35–40 lakhs) and take the rest as a home loan. This way, you get reasonable EMI, tax benefits, and enough liquidity.

By keeping Rs 20–25 lakhs safe, you will handle future uncertainties better. This balance gives both comfort and confidence.

Avoid putting more than 50% of total cost from your pocket unless your income is extremely high and stable.

» Benefits of preserving liquidity through investments

The remaining cash can be invested gradually in a mix of short-term debt funds, hybrid funds, and diversified equity mutual funds.

These funds will act as:
– Emergency corpus.
– Child education reserve.
– Future prepayment support for your home loan.

Having invested funds growing in the background gives flexibility to prepay later if you wish. You can use bonuses or increments to reduce principal slowly rather than paying heavy cash upfront now.

» Future income growth and EMI comfort

Your combined income of Rs 3.6 lakhs per month will likely grow over time. So, a slightly higher EMI now will become more comfortable in future. Therefore, taking a larger home loan today does not mean long-term strain. It actually aligns better with your rising income potential.

This strategy keeps liquidity available today, when you have more responsibilities, and lets you repay faster later when your salary rises.

» Understanding tax and repayment efficiency

By maintaining a home loan, you can claim:
– Up to Rs 2 lakh deduction on interest per year (for self-occupied property).
– Up to Rs 1.5 lakh deduction on principal under Section 80C.

Together, these tax savings reduce your effective cost of loan. When you repay too much upfront, you miss these benefits. So a well-balanced loan amount maximises efficiency.

» Insurance protection for loan liability

Before taking the home loan, ensure you have proper term insurance. The sum assured should cover the loan amount plus future family needs.

This ensures that your spouse and child are fully protected in case of any uncertainty. It is always better to take a separate pure term plan instead of loan-linked insurance from the bank.

Also, have adequate health insurance for all family members. This prevents emergency expenses from disturbing your EMI or savings.

» Long-term financial vision

Owning a house is a milestone, not the final goal. Your bigger goal should be financial freedom. After buying the house, continue disciplined savings for retirement, child education, and emergencies.

Once you settle in your home, start investing monthly through SIPs in diversified mutual funds. They will create parallel wealth and balance the immovable asset of your house.

This way, you will enjoy your home without feeling financially tied to it.

» Practical steps to finalise decision

– Recheck your current savings and how much you can keep aside safely.
– Maintain at least Rs 15–20 lakhs as emergency or investment reserve.
– Opt for a home loan of around Rs 70–75 lakhs if possible.
– Use your cash for down payment, registration, and initial interiors.
– Invest the rest smartly through a Certified Financial Planner.
– Protect your family with term and health insurance before loan disbursal.
– Avoid using credit cards or personal loans for interiors. Plan them gradually.

» Finally

Buying your first home is a proud and emotional decision. You are planning it wisely. Your goal should not be only to reduce EMI but to maintain balance between comfort and liquidity.

Avoid locking too much money into the property. Keep enough liquid funds for emergencies, education, and future opportunities. A slightly higher home loan gives flexibility, tax savings, and financial safety.

Your family’s financial stability should not depend only on the house. It should depend on your cash flow and peace of mind. That comes from balance, not from extremes.

You are already making a responsible and thoughtful decision. Continue this maturity, and your dream home will also become a secure and peaceful home.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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