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POSTED BY ON April 17, 2014 1:44 pm COMMENTS (13)
Hi Members,
This is Ashok Ravi from Chennai. I currently have a home loan balance of around 10L. With my savings and emergency funds and recent incentives, I would be able to achieve that amount within a month.
I personally want to close the home loan and become debt free but my wife is insisting to buy land (at least half a ground) in a good yielding place in Chennai. Its kind of tough decision to take as I see both options with lot of advantages.
I need your suggestions/inputs to decide what would be the beneficial approach for this query!!
Thanks,
Ashok R
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Dear Ashok, do not go by my words, just check, what ‘ll be the saving if you opt to repay the loan and what ‘ll be the saving if you opt to park the amount in FDs till your loan runs for normal term.
Please calculate and share the result with us.
Thanks
Ashal
Yep, Im fine with FDs. What would be the advantage of that? Is that a better option rather than buying a land or closing the loan? Can you brief me your explanation on this option pls.
Dear Ashok, OK. How about putting the same amount in bank Fds if you are comfortable with FDs?
Thanks
Ashal
Dear Ashal,
I haven’t tried out MF so far. And I feel investing such a huge amount seems to be risky.
Dear Ashok, what w’d you say, If I tell to invest the same 10L Rs. in a lump sum into a MF? Keep the home loan going.
Thanks
Ashal
I understand Ashal. But having an option to close the loan provides me a debt free portfolio right. I can rather use 10k for doing an SIP. On the other hand, my wife is insisting to buy a land, which can add an asset to my portfolio but I dont see much increase of price happening in chennai.
Dear Ashok, on a different note – paying EMI of 10K in 2010 and paying EMI of 10K in 2014 not same. Can you clarify why?
Thanks
Ashal
Hello Ashal,
I never underestimate the emergency fund and handling risk has always been part of my financial plan. Im just brainstorming the ideas with the existing funds I have. My inlaws are also insisting on buying a land and they are willing to share me the amount which is equivalent to my emergency fund.
But I see stagnation on Real Estate industry and I dont see much appreciation on investing on land. I still want to close my loan. Provide your thoughts!!
Dear Viren, respect his choice.
Dear Ashok, so you are sure that GOD has told you, No emergency ‘ll strike you in next 9-12 months till you manage your emergency fund again. Right? So what are you waiting for? Please do what you want to do.
Thanks
Ashal
You are underestimating the need to maintain emergency fund.
Viren,
Having a debt of 10L, I dont see a need for having 3.5L in emergency fund. One challenge post being debt free is to create that fund in around 6months.
Ashal,
Im planning to take 3L from my emergency fund, 3L from my savings(3yrs of savings which includes some part of my father’s savings as well), 2L from Children savings (My children just crossed 1 and I thought of using their savings) and entire 2L from my incentive.
Dear Ashok, can you provide the break up of money you are arranging from emergency fund, investments, incentives?
Thanks
Ashal
Hello,
Whatever option you choose, please do not use emergency funds for this purpose.
Reserve emergency funds only for emergency situation.