A quick guide to save for your dream home!
Buying a home is like a dream that is inherited by most of us from our families just like genes, habits and in some cases, money. The ultimate goal in life, a sign of having arrived, a boost to your self-confidence or security for your children- owning your own home can be as gratifying as it gets!
And since it is a ‘must-achieve at least once’ kind of a milestone in your life, it becomes a long-term financial goal which requires saving money for the down payment, ensuring future inflow for EMIs and then trying for early-closure of the loan for the remainder of your life. So, how about we make this calculation easy for you?
Firstly, if you are well-versed with the savings options available in our country, you probably have invested in mutual funds already. For the rest of you who are uninitiated, mutual funds are a basket of securities wherein you invest your money to grow, and your money is further invested in organisations across sectors and capitalizations in order to diversify.
For any long-term investment goal, it is advisable to start your investment in equity- oriented mutual fund via Systematic Investment Planning (SIP). This is because equity MF might provide better tax-adjusted returns in the future and SIP diversifies your risk over time and averages out the cost. Now, let us take a hypothetical example of you wanting to buy a house worth 1 Cr, 15 years from now.
*Assumed rates (hypothetical)
So, if you invest Rs 25,000 per month till 15 years, you shall accumulate roughly 73% of the house cost for the down payment and consider a loan for the rest of the amount. There can be below two variations in this arrangement-
You can start a smaller SIP and keep increasing the amount as your income increases You aim for a lower down payment or a lower period of investment. We have tried to maximize the down payment to save on the interest you end up paying on the borrowed amount.