Good Day Sir,
I am 33 now and both husband and wife earning around 1.6 lakhs per annum. We are renting a home of 18000 PM. Total expenses are 1.3 lakhs per month(Including Insurance, basic expenses, term, mutual fund). Investing 21000 PM in mutual fund, want to take a home in city like Noida of around 65 Lakhs. Loan would be around 50 lakhs for 20 yrs of time frame. Current savings is around 20 Lakhs. Can I take a home on loan now or should I wait?
Ans: Assessing Your Current Financial Situation
Income and Expenses
You and your spouse earn around Rs 1.6 lakhs per month.
Your total expenses are Rs 1.3 lakhs per month.
This includes rent, insurance, basic expenses, and mutual fund investments.
Savings and Investments
You are investing Rs 21,000 per month in mutual funds.
Your current savings stand at Rs 20 lakhs.
Home Purchase Consideration
You want to buy a home in Noida worth Rs 65 lakhs.
You plan to take a home loan of Rs 50 lakhs for 20 years.
Financial Stability and Decision-Making
It's crucial to understand the impact of this decision on your financial stability.
Buying a home is a significant financial commitment.
Evaluating the Home Loan Option
Loan Details
A home loan of Rs 50 lakhs for 20 years.
Monthly EMI will depend on the interest rate.
EMI Impact on Monthly Budget
Calculate the EMI to understand its impact on your monthly budget.
Ensure the EMI fits within your budget without straining finances.
Comparing Renting vs. Buying
Currently, you pay Rs 18,000 per month in rent.
Compare this with the expected EMI.
Buying a home may offer long-term benefits.
Pros and Cons of Buying a Home Now
Advantages of Buying Now
Fixed Asset
Owning a home provides a sense of security.
It's a long-term investment for your family.
Appreciation Potential
Property values in Noida may appreciate over time.
This can be beneficial for your investment.
Personalization
You can customize your own home to your liking.
This adds to your comfort and satisfaction.
Disadvantages of Buying Now
Financial Strain
A large EMI could strain your monthly budget.
Ensure you can manage all expenses comfortably.
Opportunity Cost
Using savings for a down payment may reduce your liquidity.
Consider the impact on your emergency fund.
Interest Burden
Home loans come with interest payments.
This adds to the total cost of the property.
Alternative Investment Options
Increasing Mutual Fund Investments
Consider increasing your mutual fund investments.
This can help build a larger corpus over time.
Power of Compounding
Mutual funds benefit from compounding returns.
The longer you invest, the more your money grows.
Risk Diversification
Diversify your investments across different mutual fund categories.
This reduces risk and enhances returns.
Regular Funds vs. Direct Funds
Benefits of Regular Funds
Investing through an MFD with CFP credentials provides professional guidance.
Regular funds offer advisory support.
Drawbacks of Direct Funds
Direct funds require more active management.
You may miss out on expert advice and insights.
Assessing the Timing
Market Conditions
Consider the current real estate market conditions in Noida.
Buying during a favorable market can be advantageous.
Personal Financial Goals
Align your home purchase with your long-term financial goals.
Ensure it doesn't compromise other important financial objectives.
Future Income Prospects
Evaluate your future income prospects.
A stable or increasing income can support your loan repayment.
Final Insights
Comprehensive Financial Plan
Create a comprehensive financial plan.
Include your home purchase, investments, and savings goals.
Emergency Fund
Maintain a robust emergency fund.
Ensure you have 6-12 months of expenses saved.
Professional Guidance
Consult a Certified Financial Planner (CFP).
Get personalized advice tailored to your financial situation.
Balanced Approach
Balance your home loan with other financial commitments.
Ensure a comfortable lifestyle without financial stress.
Regular Review
Regularly review your financial plan.
Adjust it based on changes in income, expenses, and goals.
Long-Term Perspective
Keep a long-term perspective.
Consider the overall impact of your financial decisions on your future.
Conclusion
Buying a home is a significant decision.
Assess all factors carefully.
Ensure it aligns with your financial goals and stability.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
