I am 39 having a monthly gross salary of 1.10 and received in hand is 81000. I have two children 10 and 5 years old. I want to take a home loan of 50 lac. Monthly expenses are about 35000/- . My second source of income gives me on an average 25000/- p.m. No other savings is there. However I have a health insurance and term loan and a Lic for Sum assured 25lac.
Now I want to have my own house and I want to take a home loan of 50 lac. At present I am residing in parents home.
Sourav Pranjal
Ans: Financial Overview and Assessment
Your financial profile shows a solid income and manageable expenses. However, acquiring a home loan requires careful consideration. Let's break down your financial situation and evaluate the feasibility of a Rs 50 lakh home loan.
Income and Expenses
Primary Income: Rs 81,000/month
Secondary Income: Rs 25,000/month
Total Monthly Income: Rs 1,06,000
Monthly Expenses: Rs 35,000
Net Savings Potential: Rs 71,000
Existing Financial Commitments
Health Insurance: Ensures medical security
Term Loan: Provides life cover
LIC Policy: Sum assured of Rs 25 lakh
Evaluating Home Loan Feasibility
Home Loan Requirement: Rs 50 lakh
EMI Calculation: The EMI for a Rs 50 lakh home loan for 20 years at an 8% interest rate would be approximately Rs 41,822.
Analysis of EMI Affordability
Net Savings Potential: Rs 71,000
Expected EMI: Rs 41,822
You can comfortably afford the EMI. Your net savings post-EMI payment would be Rs 29,178, which provides a good cushion for emergencies and additional savings.
Planning for Future Expenses
Children’s Education: Planning is crucial for your children's education expenses. Start a SIP in a diversified equity mutual fund to build a corpus for this.
Emergency Fund: Maintain an emergency fund equivalent to 6 months of expenses, including EMI.
Investment Strategy
Mutual Funds SIPs: Invest in diversified mutual funds to grow your wealth over time.
Stocks SIP: Direct stock SIPs can offer higher returns but come with higher risk. Balance with mutual funds for stability.
Insurance and Savings Recommendations
Increase Term Insurance: Ensure your term insurance covers at least 10 times your annual income.
Review LIC Policy: Evaluate the performance and consider if switching to mutual funds can yield better returns.
Advantages of Mutual Fund SIPs Over Direct Stock SIPs
Professional Management: Managed by experts who make informed decisions.
Diversification: Reduces risk by spreading investments across multiple stocks.
Ease of Investing: Less time-consuming and easier to manage.
Liquidity: Easy to redeem units when needed.
Final Insights
Home Loan Feasibility: You can afford the home loan. Ensure you have a buffer for emergencies.
Children’s Education: Start saving through SIPs to build a corpus.
Emergency Fund: Maintain 6 months of expenses as a buffer.
Term Insurance: Increase coverage to secure your family’s future.
Investment Strategy: Diversify between mutual funds and stocks. Prioritise mutual funds for stability and professional management.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
