POSTED BY March 13, 2014 1:13 pm COMMENTS (11)ON
There were many ideas and clarifications on topic, Prepayment of housing loan vs Investment in FD/other Instruments. I need to understand that if a person has a huge amount on hand(liquid) and he would like to buy a house, what he should do ?
1. Complete Down-payment or Invest the amount and Take Loan? (ps, myself still falls under 20% slab)
2. If investment, what are the best options?
3. If Loan, what’s the beneficial tenure, as I understand from the calculations below, longer the return, better the gain. Also, someone suggested to keep Loan limited to 30 Lakhs, if possible for benefits.
3. If wife is non-working, is it advisable to make her a co-owner while applying the loan, for any future prospects?
4. Consider the cost of a house is 50 Lakhs and I have 50L Liquidity available. Based on the recent RBI notification,
lets consider 20 L Down Payment(from available Liquidity) + 30 L Bank loan.
Option 1 : 30 L Lone(10.15%, 25 Year) + 30 L Investment ( NSC for 25 years @ 8.8%)
Option 2 :20 L Lone + 20 L Investment ( NSC for 25 years @ 8.8%)
Option 3 :10 L Lone + 10 L Investment ( NSC for 25 years @ 8.8%)
In the above mentioned calculation, I took the Final Gains = total return from investment – total amount paid to bank. And I found the results were maximum for Option 1. Hence, i reached to a conclusion that taking a loan for longer terms is beneficial.