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.
?
Monthly Cash Flow and Savings Strength
Your income is Rs 1.5 lakh per month.
?
Your current expense is Rs 1 lakh per month.
?
Auto loan EMI is Rs 13,000. That’s a long-term liability till mid-2026.
?
Your effective savings are about Rs 37,000 monthly, if we include EMI as a fixed outgoing.
?
This savings rate is just around 25% of your income.
?
Ideally, you should save at least 35% to 40% of income at this stage.
?
You have Rs 1.3 lakh in mutual funds through SIPs. That’s a good beginning.
?
You also have Rs 6.5 lakh in equities. This adds to your long-term wealth pool.
?
Emergency fund is well managed — Rs 2 lakh in cash and Rs 10 lakh in bank savings.
?
But too much idle money in savings account gives low return.
?
You can restructure some of this idle amount for higher growth.
?
Health insurance is well set — Rs 10 lakh + Rs 1 crore top-up. Very thoughtful decision.
?
Home Loan Decision — Evaluate Carefully
You plan to take a Rs 50 lakh loan with Rs 8 lakh down payment.
?
That means property value may be around Rs 58 lakh or more.
?
EMI on Rs 50 lakh loan for 20 years may be approx Rs 45,000 to Rs 48,000 monthly.
?
This EMI is 30%+ of your monthly income.
?
Adding EMI to your current expense of Rs 1 lakh will take total outgo above Rs 1.45 lakh.
?
That leaves little room for savings, emergencies, or business volatility.
?
Your business income may fluctuate. Loan EMI remains fixed.
?
That can cause cash flow strain in any weak business month.
?
You will also have to manage property maintenance, taxes, and house setup costs.
?
After buying the house, your liquidity will be tight.
?
You will have very limited flexibility to grow business, invest, or manage kid’s goals.
?
Therefore, taking a big loan now is not suitable.
?
Recommended Path — Strengthen First, Then Buy
Hold the house purchase for now. Build more financial strength first.
?
Target at least Rs 20 lakh in financial corpus before buying house.
?
That will make the down payment easier and lower the loan requirement.
?
Smaller loan means lower EMI. That keeps your cash flow balanced.
?
Focus more on building mutual funds portfolio over next 3-4 years.
?
Increase your SIP gradually every 6 months. Even Rs 1,000 to Rs 2,000 increase matters.
?
Keep mutual fund investments via regular plans through a Certified Financial Planner.
?
A planner will guide based on your goals and risk.
?
Avoid direct mutual fund route. You will miss professional advice and tracking.
?
Regular plans via planner offer better long-term discipline and help in market cycles.
?
Also avoid index funds. They are passive and do not beat inflation over long periods.
?
Actively managed funds offer better returns with risk-adjusted strategies.
?
Choose diversified equity funds across flexi cap, mid cap, and hybrid for balance.
?
Review the equity stocks you already hold. Avoid overexposure to one sector.
?
If these stocks are idle or underperforming, shift them to mutual funds gradually.
?
Use your wife’s savings as well to build long-term assets.
?
Joint SIPs or funds in her name can help reduce tax in future.
?
Kids’ Education — Start Dedicated Planning Now
Your daughters are 4 and 9 years old. Time is on your side.
?
School and college costs will rise sharply due to inflation.
?
Plan Rs 25 to 30 lakh for each child over next 10 to 15 years.
?
Begin a separate SIP for children’s education.
?
Start with Rs 5,000 monthly. Increase every year with income.
?
Keep this in a growth-oriented fund with child-specific goal.
?
Keep insurance separate from investments. Don’t mix them.
?
Avoid child ULIPs or education endowment policies.
?
For safety, consider taking a term plan of Rs 1 crore for yourself.
?
Term insurance is cheap and gives peace of mind.
?
Emergency Fund — Optimise Returns
You have Rs 2 lakh in cash and Rs 10 lakh in bank savings.
?
That is excess idle balance in savings account.
?
Move at least Rs 6 lakh to a short-term debt mutual fund or arbitrage fund.
?
This gives better return than savings bank interest.
?
Keep Rs 2 lakh in cash and Rs 4 lakh in bank savings for any urgent needs.
?
Debt funds offer liquidity and 5-6% returns post-tax.
?
This strategy keeps your emergency fund safe and productive.
?
Business Goals — Don’t Ignore Capital Needs
You are self-employed. Business stability affects entire family.
?
Set aside at least Rs 3 lakh to 5 lakh as business contingency buffer.
?
This buffer helps you manage cash cycles, bulk orders, or temporary slowdowns.
?
Use a liquid fund or sweep account for this buffer.
?
Don’t touch this for personal needs or investments.
?
As your business grows, increase this buffer proportionately.
?
Review business income, cash flows, and margins every quarter.
?
If income becomes stable, then only think of buying property with clarity.
?
Real Estate — Don’t Rush
Avoid pressure to buy house just because rent is going out.
?
Rent is a known cost. EMI is a fixed liability.
?
House purchase brings big responsibilities like maintenance, tax, and low liquidity.
?
If you move house or city due to business, house becomes a burden.
?
Instead, grow your financial net worth. That gives better freedom.
?
You can always buy a house 3-4 years later with less loan.
?
That also gives you better bargaining power.
?
Monthly Budget Review — Create Savings Habit
Review expenses monthly with your wife.
?
Track wasteful spends. Avoid lifestyle creep.
?
Try to bring expenses below Rs 90,000 per month.
?
Save the extra in SIPs and emergency buffer.
?
Discuss financial goals openly with your spouse. Involve her in small investment steps.
?
Make goal chart for house, kids, and retirement.
?
This brings alignment and motivation.
?
Final Insights
Don’t buy house now. Strengthen financials first.
?
Maintain SIP discipline. Gradually increase monthly SIP.
?
Build Rs 20 lakh corpus in next 3-4 years.
?
Only then take smaller home loan for balance amount.
?
Don’t break equity or MF holdings to buy house.
?
Use Certified Financial Planner to design full plan for family goals.
?
Avoid direct funds, index funds, or mix insurance products.
?
Separate insurance, investment, and emergency funds clearly.
?
Use wife’s savings also to build joint future.
?
Invest with goal-based planning, not just product-based decision.
?
Stay patient and consistent. You will achieve house and kids goals peacefully.
?
Best Regards,
?
K. Ramalingam, MBA, CFP,
?
Chief Financial Planner,
?
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Rashmikant on May 11, 2023Hindi
.jpg "investments-o (2).jpg")
