Good thing is that the RE prices are falling & it is still going to fall considerably. This is a chance for us to teach the builders & make them beg for their survival. We need to stay out of the re market for atleast 3 months to get the price back to its normal level.
But, even if the price falls down, one need to make sure that he/she can pay the loans for the whole 20 yrs. Normally the loan period is around 20 yrs & for every lakh that u borrow, the interest rate is around Rs.1000, so for every lakh that u loan, u essentially pay around Rs.240000 by the end of the 20th year, which of course is huge cnsdng the risk u are taking & the pain u are going through to pay back.
Let's do a simple calc, considering u buy a 2 or 3 bhk apt for Rs.3500000:
Ur loan - Rs. 2500000
Down pymt - Rs. 1000000
Monthly EMI - Rs. 25000
Yearly EMI - Rs. 300000
Loan/Tax benefit- Rs. 100000
So essentially, u have to keep aside Rs.200000 after taxes every year for the next 20 yrs even after u put Rs.1000000 of ur savings. This means u/ur partner need to make sure no matter whatever goes on in this world, be it reccession, inflation, job loss, ur food exp, childcare exp, education exp, commuting exp, auspicious exp, medical exp, recreation exp, etc. u have to pay the EMI. Otherwise u risk losing ur house, ur down pymt, & ur paid interest. This is all considering the interest remains flat at this rate.
Now think before u get a bank loan... Affordability is more important...
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i think you should prepay and try to close out the loan much before 20 years. Not sure why you should drag on and on. The other alternative to owning a house is to stay in a rented place now and buy after saving the entire cash. This is not feasible for most of us, and can you predict the real estate market when you have cash in hand ? we cannot predict the real estate, so the best thing is to do is consider affordability, take a flat well within 3 times your gross salary, pay 20-25 percent down payment upfront and try to prepay so that loan is closed in 5 years. Affordability is important I agree.
As for your other prediction, one cannot say what will happen to RE prices, it will reduce but if economy recovers, RE will again rise. So if you need a house for staying and it is affordable, I think you should go for it
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