A fantastic choice when it comes to making contributions specifically for your future is the Systematic Investment Plan. Here, you make a set investment for a certain amount of time that helps you achieve your goals in a planned manner, much like the EMI you make to pay off your mortgage.
However, it’s simpler said than done to purchase a property. In most cities, the cost of property is already approaching the moon. To buy your dream home, you must go beyond your comfort zone. If you do not receive a sizable sum, you must take out a mortgage loan to purchase your ideal house.
You will then be required to pay a substantial interest sum, typically greater than the house loan’s principle. And you’ll wind up paying a significant portion of your monthly wage in EMI.
Rupee Cost Averaging
Rupee cost averaging is a long-term investing strategy that can help you manage market fluctuations and maximise investment returns. It guarantees that you receive more NAV (Net Asset Value) when rates are low, and when prices are high, you receive fewer shares.
This is not only automated, but it also prevents you from taking the chance to purchase more while costs are high. Investing a set monthly income keeps the average investment cost at a lower level, resulting in long-term profit.
Power Of Compounding
A crucial element of investments and profits is compounding. When returns are invested, and interest is generated on interest already earned, the magic of compounding is at work. The profit is significantly bigger when you continue this for a longer time.
When you invest in SIP, it gives you a tonne of freedom. You can select an investment amount and term starting at just Rs. 500. Depending on your convenience, you can also decide whether to make investments daily, weekly, fortnightly, or monthly. Your SIP gives you a decent amount of liquidity, so you can stop and cancel it anytime.
Estimate The Price
Calculating how much money will need to purchase the house you want should be the first step. Remember to factor in extra expenses like registration fees, interior expenditures, stamp duty fees, etc., while calculating the sum. The bank’s mortgage loan won’t cover these additional expenses. Therefore, it is best to budget ahead for these expenses.
More crucially, while predicting the future worth of your ideal home, you must account for real estate inflation.
Calculate the amount you need
Banks only provide part of the amount needed to purchase a property when you take out a home loan. Typically, banks would only lend you up to 80% of the home’s value. You are responsible for raising the final 20% on your own. The amount you must pay upfront is referred to as a down payment. Only once your down payment has been paid in full does the bank begin loan disbursement.
The ideal scenario requires you to pay at least 60% of the property’s value out of your pocket; the remaining balance can be covered using a bank loan. By paying this significant portion yourself, you will ensure that the overall interest you pay to purchase the house is reasonable.
The main lessons learned are that you should consider rising real estate inflation in your budget estimate and additional expenses. Making merely the bare minimum down payment could cost you a lot of money down the road. Therefore, it is best to put more money down and invest in mutual funds for a while.
The return from the compounding effect is substantially greater in the short term if you put the same amount in a SIP that you would otherwise invest in your EMI.