I have been investing Rs 10,000 in mutual funds through SIPs for the last three years. Initially, I planned to buy a house using this money but now I have postponed my plan by six months because all the investments are in negative. However, I would need it after six months to buy a house. Should I continue with the SIPs till then? Or should I arrange a loan to buy the house until the market recovers and then, repay the loan from this investment? What would be your suggestion?
-Vikaal
When it comes to buying a home, I always suggest that take it on a loan. At the same time, one should do a substantial downpayment. A prudent rule to follow for an individual is that not more than a third of your income should go towards the repayment of your loan. The second thing which normally is helpful is that if you buy a house, you should be in a position to take immediate possession to save the rental outflow. So, if you are living in a rented house, you should be able to move to that place immediately. Saving on the rent will be an added advantage.
If the EMI is more than the third of your income, then either scale down the cost of the house or wait and keep saving till the time you are able to accumulate a substantial down payment for that purpose. This is the only prudent rule that ensures that you don't get anxious after buying the house.
This article was originally published on July 16, 2020.
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