If you want to take a home loan, invest in mutual fund SIPs. If that statement surprises you, read on. Buying a house, a flat or building a house on a plot of land always conjures up the image of a housing loan which is usually taken from a bank or a housing finance company. However, mutual funds can also play a role in such heavy expenditures. Let’s find out how.
Home loan for a Rs 60-lakh flat
Take an example of a person who wants to buy a flat for Rs 60 lakh. He has options to take home loans for 20 or 25 years. But no matter whatever the amount of loan he/she applies for, the applicant has to pay for the down payment of the flat and registration and associated charges from his/her own pocket. And that is not going to be a small amount.
Usually, any bank provides a maximum of 80% of the value of a property on loan. Now 80% of Rs 60 lakh is Rs 48 lakh, which the maximum amount that a bank would provide. Therefore, the buyer has to provide a minimum of Rs 12 lakh from his pocket.
Head for a SIP
In order to arrange for Rs 12 lakh, the easiest way for a prospective buyer is to start SIPs in mutual funds. He/she should start investing at least 5-7 years before the loan is to be applied for. Any qualified investment strategist would tell you a few performing funds that can generate significant rate of returns over a 5-year or 7-year period.
SIP to ensure down payment
Now consider this scenario. Even if you can invest Rs 10,000 a month in a SIP that generates an annual rate of return of 12%, you would get nothing less than Rs 13.19 lakh in 7 years. This will be enough to cover you for the down payment and still have some money to spare for the stamp duty and registration charges of the property.
Also for decoration
If you can invest Rs 15,000 a month the SIP would generate a value of close to Rs 20 lakh. In such a situation, the value of the portfolio can also defray the cost of decoration of the newly-acquired flat.
Buying a house is the biggest financial decision that a common man is likely to undertake in his/her entire life. While one generally takes a home loan, mutual funds can also help in the purchase. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
