I am planning to buy a house with the help of bank loan. How should I decide on the budget?
-Anshul
There are two-three things which one should keep in mind. One, will buying a house translate into saving your rent? That is an immediate benefit. The most conservative approach should be to have at least 25 to 40 per cent of the down payment. To give an example, if your house is worth Rs 1 crore, you should have Rs 25 to 40 lakh for the down payment. This should be your own money. The rest you can borrow. And the EMI for that borrowing should ideally be not more than 25 per cent of your income. It should definitely not exceed 33 per cent of your income. So, three things: you save on your rent which means that in near future you are going to live in that house; you have 40 per cent of the down payment; and not more than one-third of your income is going to repay the loan. That should be the budget.
This article was originally published on March 07, 2019.
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