Is House Loan better early in your career?
I've got a package around 40 LPA with 4 yrs exp, with 1.8L as take home Now, my parents are looking to buy a house at my home town (tier 2 city). It costs around 65L, so have to a loan of around 50L which will be around 65k EMI every month for the next 10 years Also I'm passionate about working on side projects doing some part time gigs, share around 40k to my family for their needs. This house loan will have a burden on me for sure, do you think it's the right decision to take home now or maybe postpone it to later?
Bandook
Stealth
a year ago
I personally feel buying home early is much better, the rate at which your salary will increase will be much lower than the rate at which property price appreciates. (Again this depends on location of the property).
I would suggest to first look TP Scheme (town planning scheme) of your city where you are planning to buy a house.
This will help you decide location where you will get good appreciation. Generally TP schemes are passed for many years ahead.
Also if you have someone in SBI or other govt banks you can also get inside information if any loan/project is approved for state government from those planned under TP scheme.
I have CTC less than yours but as of now i own 4 properties in 2 cities, all at 6-8 lane roads, with metro and dmart etc nearby.
Always look for proposed roads under TP schemes. Once road is there, everything will come in few years. Good connectivity is key to great appreciation in property value.
Also, if you have a home loan don't look it as burden, but it is one step forward to your financial freedom. It will stop you from doing unnecessary expenses. Also it can provide you good rental income, tax benefit (if you have taken home loan).
To summarise, i would suggest to go ahead with buying your home, first look for TP scheme and based on that, try to book under-construction property (if buying home in a appartment/society).
slumdog
Stealth
a year ago
Awesome! thanks for the valuable suggestion, and just curious how did you own these 4 properties? Is it possible to apply parallel loans or is it cash, would love to get more info on this
EarthDragon
Stealth
a year ago
You can get parallel loans. Based on your net take home, banks can calculate total disbursement amount to you.
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slumdog
Stealth
a year ago
Absolutely amazing, had no idea about these things, thanks
Bandook
Stealth
a year ago
Happy to help...
Just one last thing, there is a group of people who believe that buying property is not good when you can get the same lifestyle while staying on rented property...
This is a wide spread lie, if you do the math, over your lifetime, amount of rent that you will pay will be much more than the cost of house. And you are ensuring a roof for your family even after you are dead. (May you live till you are not bed ridden).
Also, always listen to your parents, they might not be right all the time but their experience of life will certainly add some insight which will help you make wise decisions.
slumdog
Stealth
a year ago
purely because of high interest amount if it's long term, I'm okay with that emi amount as per my salary, i just want to finish the loan as early as possible
Bandook
Stealth
a year ago
Well, i would still suggest that you keep some leverage of money for emergencies. Don't expect that you will never have any sort of financial emergency.
Also, keep loan tenure as long as possible and don't worry about the interest. If you keep your tenure short, and pay emi you will pay large chunk of that as interest and small chunk as principal(during early years). Take a loan where you do not have restrictions on early repayment. Then keep your emi as low as possible and every month keep aside amount which you have saved from emi. (Which otherwise you would have paid as emi) and then after few months early repay that collected amount to your bank. This way whatever you are saving and paying extra...whole amount will go for principal reduction, which otherwise would have been interest + principal where interest is much higher than principal component during early years.
And if this doesn't suit you, you can anytime ask your bank to increase emi which will automatically reduce your tenure.
Regarding emergency, almost a year ago home loans were in range of 6.5% interest rate. If someone like you had took a loan leaving no margin, then he might had to sell his home as RBI increased repo rate and now loans are in range of 9+% rate of interest.
Think again about your margins and decide wisely.
There's a very simple answer to this actually. Telling from my experience.
Financially it's a bad decision. Straight up. No arguments here.
But do you care more about the money or your parents' feelings? Have they been telling you to buy a house for a long time? Do they say all they want is a house? If yes, then you shouldn't be thinking about money at this age.
slumdog
Stealth
a year ago
Answer to this is more towards emotional decision since they have this desire from a long time.
But I'm curious to understand why it's a bad decision, what went wrong in your case
Gokart
Stealth
a year ago
Just google the math around this
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RagePank
Stealth
a year ago
If you invest financial assets, at the age of 60, you'll have money + home.
If you take a loan to buy a home, at the age of 60, you'll just have a home.
Real estate gives poor return over a 30-year period.
Take your pick. Be a rich man in a home, or be a poor man in a home.
RagePank
Stealth
a year ago
True, to make memories you need money or you need time. To get time, you need money.
Go for it… what’s the worst thing could happen.. max you can’t pay the EMI AND bank will take over it… if you have will u will pay it off in next 2 years…
slumdog
Stealth
a year ago
30 is base, 3 is variable, rest is stocks (at 25% every year)
I am at 22 LPA. Have bought a 3bhk in Ahmedabad at 1.28 CR. Going to take loan of 90 plus. House is under construction and expected to get completed by Mid next year. My EMI will peak at 78K. My plan is to jump and get to 30LPA base before the peak EMI sets in.
Is it risky? Yes. Will it put financial burden on Me? Maybe Yes. Do i think my family deserves a big home after all they have done for me? Absolutely fucking yes. I’d do it again.
I thought a lot about all these things but after certain point, i threw logic out of window. If i waited for 5 years more, property cost would’ve already reached 1.6/1.7. So. Go with your heart. Roads will open.
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