I have a mutual fund corpus of Rs 30 lakh. I am looking to buy a 1 bhk apartment in suburban Mumbai for Rs 1.2 crore. My wife too will be contributing Rs 40 lakh. Shall I go for a home loan or take loan from family and friends to make up for the remaining Rs 50 lakh? Our monthly in-hand salary is Rs 1,80,000 approximately after deducting for all the expenses and taxes.

Ans: Here's a breakdown to help you decide between a home loan and borrowing from family/friends:

1. Taking a home loan:

• Loan feasibility: With a combined monthly income of Rs 1.8 lakh, you can comfortably afford an EMI of around Rs 50,000- Rs 60,000 (assuming a 20-year loan tenure and interest rate around 8%). This would be sufficient to cover the Rs 50 lakh loan you require. You can use an EMI calculator on many bank websites to get a more precise idea.
• Benefits: There are tax benefits associated with home loans. You can deduct the interest paid on the home loan from your taxable income, which can bring down your tax liability. Additionally, owning a property appreciates in value over time.
• Drawbacks: Home loans come with processing fees and other charges. There can also be prepayment penalties if you choose to close the loan before the tenure ends.

2. Borrowing from family/friends:

• Benefits: You might be able to negotiate a lower interest rate compared to a bank loan. There's also more flexibility in terms of repayment schedules.
• Drawbacks: Borrowing from friends or family can strain relationships if there are delays in repayment or disagreements over terms. Make sure to have a written agreement outlining the interest rate, repayment schedule, and other important details.

3. Considering your situation:

• The EMI for Rs 50 lakh loan seems manageable based on your income.
• Home loan interest rates are currently around 8%, which might be lower than the interest rate you would be charged by friends or family.
• Tax benefits on home loans can give you additional savings.

4. Recommendation:

Given your financial situation, taking a home loan seems like a viable option. However, it's always good to compare interest rates and terms offered by different lenders before finalising a deal.

You can also talk to your family and friends to see if they are willing to offer you a loan at a competitive rate.

5. Here are some additional things to consider:

• Stability of income: Make sure your job is stable enough to ensure timely EMI payments.
• Down payment: A larger down payment will bring down the loan amount and your EMI burden.
• Future expenses: Factor in other expenses associated with property ownership such as maintenance, property taxes, etc.

Ultimately, the decision of whether to take a home loan or borrow from family/friends depends on your individual circumstances and comfort level.