Home loan vs cash payment in India

Amazon
fibwsij

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fibwsij
Sep 12, 2021 6 Comments

Hi guys, I'm planning to purchase a flat in Hyderabad for 80L. I have 40L cash in savings. I know I should have invested by now, but didn't have much financial knowledge until recently.

Now I have two options, either I take a home loan, and invest the 40L as lumpsum into a mutual fund or use the money to purchase the house with zero loan (Planning to sell a flat in hometown for rest of the amount).

I have been reading that investment + loan is better because of effective interest rate post tax benefits vs expected gains from investments. But I realised that the tax benefits don't last the entirety of the loan tenure as interest is paid mostly in the first half of the tenure, and tax benefits are on the interest amount only. I max out 80C with ppf so no benefit on the principal.

Wanted to get advice on this from folks who have knowledge on this or have gone through this already. If loan is the way to go, how to plan for it in terms of tenure, how much emi to target.

Blind tax:
Yoe - 3
TC - 41

#personalfinance #investments #realestate

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TOP 6 Comments
  • Juniper
    craphuman

    Go to company page Juniper

    craphuman
    Take home loan atleast for property's legal verification sake. Very important in Indian context.
    Sep 12, 2021 0
  • Take loan maximum . Sbi Max gain . Put all the extra cash in there. Take out from that to start sip in mutual funds. Every month.
    Sep 12, 2021 2
  • Go for the longest loan. Invest the down payment you would otherwise pay elsewhere
    Sep 12, 2021 0
  • The only tax benefit is under section 24A. Two lakhs deduction if your interest amount is more that that. Else minimum or both. So that gets you 60k saving per year.
    Play with a emi calculator to see how much years of loan you should get to maximize that. It will show the monthly/yearly interest and principal.
    MF growth has been normally better than loan interest rate. Maybe take it as 10% and for loan as 7%.. you can do an approximate calculation on the savings and if it is worth the loan.
    Sep 18, 2021 0