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POSTED BY ON December 1, 2013 11:05 pm COMMENTS (4)
I have around 30 Lakhs of savings in Govt as well as Private institutions which fetches me around 30,000 per month as interest. I don’t have any other loan. I am planning to buy a house worth around 75 lakhs by taking a loan of 40-45 lakhs and investing all the savings (30 Lakhs) by removing them from those places.
I can get a rent of 10,000 on that house. As a result, I have to pay around 40,000 as EMI towards the loan (In addition to loosing the 30,000 interests which I am getting presently). By deducting 10,000 rent which I will get, I will be paying/loosing 60,000 per month. Paying the EMI is not a problem for me. The house is in a good location and may be the price will be increased in the near future. But is it really good to take out all savings (there by loosing the interest) and take loan (there by paying 30,000) as EMI. Which one would be better in terms of money management. I wanted to take house loan to get some tax exemption also.
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No need to invest in the house, you will be screwing up your liquidity if you do so.
Dear Vnvvk,
We think that you should not pull out all your investments and add them to your loans. There will be a complete mis-management between your assets and liabilities which is not good. A good proportion of assets and liabilities will lead you to healthy financial life and will not push you into a situation of a debt trap.
Please read the article “There’s more to home loan than just interest rates!” published in Economic Times. Visit the link http://articles.economictimes.indiatimes.com/2013-05-17/personal-finance/39336790_1_home-loan-emi-payments-loan-amount
Regards,
Credexpert
http://www.credexpert.in
Dear Vnvvk, please do not opt for this house.
Thanks
Ashal
Hi Vnvvk,
If you are looking at this house as pure investment, fetching you rental returns then I personally feel you should not look at it.
By investing Rs.75L, if you are expecting a rental return of just 84K per year, which is just about 1.15% on principal, its not worth it, unless you are 100% sure that property value of this area will grow rapidly in next 4-5 years.
Regards,
Ashish Garg