I am planning to purchase a under-construction flat.
Scenario 1:- After the initial down payment, I am considering a home loan for 38L. My original thought process was to take a loan for a tenure of 15 years, the EMI comes to Rs 41,770 @ 10.40% ROI. I’m certain ( or atleast most certain) that I will make part payments of at least 1L every year starting 2 years from the loan start date.
Planned part payment schedule.
100000 6/6/15
100000 6/6/2016
100000 6/6/2017
100000 6/6/2018
100000 6/6/2019
100000 6/6/2020
With this payment structure, my total payment ( Principal + Interest ) comes to Rs 56,14,489. The tenure reduces from 180 months to 135 months keeping the EMI constant.
Scenario 2:- Now, then, if I plan to take a loan for 20 years,then the EMI would be Rs 37,684 @ 10.40 % ROI. If I plan to take this route, I can save Rs 41,770 – 37,684 ~= 4,000 per month. Since, I can afford to 15 year tenure, I think I can save this Rs 4,000 every month. If you use this Rs 4,000 in RD for every three years @ 8.75%, then the returns every three years are Rs 1,65,019. This amount is utilized for part-payment every three years.
So, the earlier planned part payment schedule becomes
100000 6/6/15
265000 6/6/2016
100000 6/6/2017
100000 6/6/2018
265000 6/6/2019
100000 6/6/2020
With this payment structure, my total payment ( Principal + Interest ) comes to Rs 54,28,828/ The tenure reduces from 240 months to 145 months keeping the EMI constant.
PS: The total amount paid may slightly be off the home loan calculator calculated value, since I thinking to do Full-EMI during the construction phase of the apartment, thereby cutting some portion of the Principal. This is applicable to both the above scenario’s.
I understand the tax component on the RD returns, but, I want to ignore that for now. Is my calculation flawed or does it make sense to go ahead for 20 year tenure? Is there anything missing, that I should have taken into account?
Please share your thoughts!
Madhan