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Can we sell our flat to pay off our new home loan?

Ramalingam Kalirajan |10956 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Feb 04, 2025

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 04, 2025Hindi

Me and my wife are both in our 40's now. We've purchased a new flat worth 1.93 CR with a house loan of 1.37 CR and an EMI for around 1.10L per month for next 30 years. Our combined earnings are around 3L per month. We have around 60L worth ESOPS, 5 other flats (all paid off) and getting a rental from 4 of those flats while one of them is occupied by our parents), 40L in PF, 10L in Gold, our Health Insurance is taken care of by the company while one set of parents (my wife's side) are covered under CGHS. My father however has had both his Kidneys Fail and needs Dialysis on a regular basis for which we pay around 1L per month. I've just recently started investing small sums in Equities. We have no kids and hence no parental responsibilities. But our lifestyle is such that we like to travel and shop a lot... our monthly expenditures including the necessities is around 2L+ We wish to lessen our home loan burden and wish to retire by 55 with a minimum corpus of at least 5cr. without any loans. Is it advisable to sell off one of the lesser lucrative flats to pay off the current home loan? Are there any other alternatives?

Ans: Your current financial position is strong. You have multiple assets, rental income, and a good salary. However, the high EMI and dialysis expenses require careful planning. Below is a structured approach to reduce your loan burden and secure your retirement.

1. Loan Repayment Strategy
Your home loan EMI of Rs 1.10L per month is a significant portion of your income.

At 30 years, you will pay a large interest amount over time.

Selling one of your lesser lucrative flats is a good option to reduce debt.

Check the rental yield of each flat. If any of them gives less than 2.5% per year, consider selling.

Use the sale proceeds to partially prepay the home loan.

This will reduce EMI and total interest paid over time.

Avoid using all your liquid savings for loan repayment.

2. Optimizing Rental Income
You own 5 flats, with 4 rented and 1 occupied by parents.

Consider renting out the least profitable flat at market rates.

Increase rent periodically to match inflation.

Ensure zero vacancy to maximize rental income.

Use rental earnings to prepay loan in lumpsum every few years.

3. Retirement Corpus Planning
You need at least Rs 5 crore in 15 years.

Your existing assets (PF, gold, ESOPs, and flats) help in wealth creation.

You need an investment plan to reach Rs 5 crore.

Start investing Rs 75,000–1L per month in a mix of equity and debt.

Increase SIPs as income grows or expenses reduce.

4. Investment Strategy
You just started investing in equities. Increase exposure gradually.

Invest in actively managed mutual funds for better returns than direct stocks.

Avoid direct stock speculation unless you have expertise.

Gold should be less than 10% of your portfolio.

ESOPs should be diversified once vested. Avoid over-reliance on one company.

PF will help, but it won’t be enough for retirement alone.

5. Managing Healthcare Costs
Your father’s dialysis costs Rs 1L per month, which is significant.

Company insurance may not cover pre-existing conditions.

Consider buying a separate health insurance policy for parents.

Look for critical illness coverage to reduce future risks.

6. Lifestyle & Expense Control
Your total monthly expenses are Rs 2L+, which is high.

Travel and shopping can slow down wealth creation.

Set a budget for discretionary spending while keeping lifestyle intact.

Reduce avoidable expenses and channel funds toward investments.

7. Emergency Fund Planning
Keep at least Rs 10L in a liquid emergency fund.

This ensures you don’t break investments during financial shocks.

Store funds in a high-interest savings account or liquid mutual fund.

8. Alternative to Selling Property
If selling is not preferred, use rental income + savings to prepay the loan.

Check if your bank allows loan restructuring for better interest rates.

Consider switching lenders if a lower rate is available.

Partial prepayments every year reduce tenure and interest burden.

Finally
Selling one less profitable flat is a good move to reduce loan stress.

Optimize rental income and invest surplus wisely.

Maintain emergency funds and health coverage for safety.

Control discretionary expenses while enjoying a comfortable lifestyle.

Invest aggressively to build a Rs 5 crore retirement corpus by 55.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

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