Mutual funds SIP vs home loan EMI
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See Fools Make houses and wise men live in them- this British adage is used relatively frequently by those who live in a rented house. Still, one may ask whether it's really wise to live in a rented accommodation and use the plutocrat saved from the home loan EMI for making further plutocrat out of it. According to investment experts, if someone isn't sure about one's stability and the megacity he or she's going to settle, it's better to live in a rented house rather buying a home and paying hefty home loan EMI. They said that buying a home may turn out an emotional rather an provident decision if someone buys one's dream home without allowing about the rationality of retaining a house.
On when and why one should live in a rented house, Mumbai- grounded duty and investment expert Balwant Jain said,"Banks do not authorize further than 80 per cent of the house property cost as home loan. So, a home loan aspirant will have to store out the fat 20 per cent property cost from one's savings. Piecemeal from this, there's stamp duty and some other eclectic charges which is also not funded in bank loan. So, one should look at one's savings before applying for a home loan."
Speaking on other factors that one must consider while applying for a home loan, Balwant Jain said,"If the person willing to buy home is posted in a megacity for short duration or it has been posted in a megacity where it do not intend to settle, also living in a rented house is a better option. Real estate deals have some costs that can not be recovered, like stamp duty, enrollment charges and brokerage for trade and purchase of the house."He said that in long term, property price rises at around 8 per cent per annum.
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On how living in a rented house can help a person to accumulate wealth over the passé of time; Pankaj Mathpal, Author & MD at Optima Money Directors said," Suppose, someone want to buy a 2-BHK flat at ₹ 35 lakh. To buy this ₹ 35 lakh home, one will have to grope out stamp duty, enrollment charges, brokerage (if applicable),etc. from one's fund that would bring around ₹ 5 lakh. So, net cost of the house including all these retired costs would come around ₹ 40 lakh. As banks do not expend further than 80 per cent of the property cost as home loan, one would get around ₹ 28 lakh as home loan. Keeping in mind that some NBFCs are giving up to 85 per cent of the property cost as home loan, one can get maximum ₹ 30 lakh home loan for a house property that costs ₹ 35 to a home buyer."Mathpal said that for ₹ 30 lakh home loan for a period of 20 times, yearly EMI would come around ₹. He advised home buyers to use the fat home loan EMI via mutual funds SIP in yearly mode as it would give at least 12 per cent periodic return on an investment of 20 times.
Asked about the settlements one can anticipate on ₹ 35 lakh house property; Amit Agarwal, CEO atNoBroker.com said,"One can anticipate periodic2.5 per cent to maximum 3 per cent of the property cost per annum as reimbursement from one's domestic property whereas in marketable property the rental income comes in the range of 8-12 per cent per annum, depending upon the position and type of marketable property one owns."He said that real estate rent grows at around 5 per cent per annum as well.
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So, assuming 3 per cent of the property cost as periodic rent, one will have to pay around ₹ per annum or ₹ 8750 per month for a ₹ 35 lakh property whereas a home buyer will have to pay ₹ 25000 per month for living in same accommodation leaving away ₹ 10 lakh onetime payment at the time of home steal.
Thus, if a person decides to live in a rented house rather of buying ₹ 35 lakh home, he or she'll be suitable to save ₹ 16250 per month from one's yearlyEMI.However, also it'll turn to around ₹ 1, If the home buyer invests this ₹ 16250 in monthly mutual funds Belt for 20 times.50 crore after 20 times if the periodic yield is 12 per cent.
Piecemeal from this, one's ₹ 10 lakh that one would be saving would turn around ₹ 92 lakh. So, net maturity quantum one would get after 20 times will be around ₹2.42 crore.
Piecemeal from this, the person living in a rented house for 20 times will end up paying ₹35.67 lakh as well.
So, net income of the person living on rent for coming 20 times will be around ₹2.06 crore
Likewise, in 20 times time, one's ₹ 35 lakh house property will grow up to ₹ 2 crore. Still, one must remember that this ₹ 2 crore will be cost of brand new house not a resale house property." Old house will cost lower plutocrat as there would be near 1 to1.5 per cent deprecation in resale house property," said Pankaj Mathpal of Optima Money Directors. So, if a person decides to trade one's house property after living there for 20 times, it would cost him around1.78 crore
So, a person living in a rented house will end up accumulating ₹ 28 lakh further after 20 times than the bone who bought ₹ 35 lakh house property.
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