How to build kitty for down payment of home loan
If you are not able to decide the right mix for your investment, you may want to seek help from a financial planner or a financial advisor.Updated: Jun 25, 2019 10:19 IST
Calculate the amount
Firstly, you need to decide the value of the property that you would like to buy and by when do you plan to buy it. Say you are 30 years old and you want to buy a house when you turn 45 years old. This means you have 15 years to build the down payment amount.
Next you need to evaluate the current market rate of a property you would like to buy. Say you plan to buy a property worth Rs 2 crore in today’s rate. Remember that the value of the property will increase due to inflation, excluding other factors.
Hence, you have to at least factor in inflation to the value of the property for 15 years. Assuming a 5% inflation, the value of the property priced at Rs 2 crore today, will cost you around Rs 4.2 crore in 15 years. Next you have to calculate the amount for down payment. Considering that you have to make a down payment of 20% of the value of the property, you will have to build a corpus of Rs 40 lakh in 15 years.
Work towards your plan every month
Now that you know you have to build Rs 40 lakh corpus, you can break it down further to your monthly saving through systematic investment plan (SIP). Depending on the assumed return, you can increase or decrease you investment amount per month. For instance, at 8% return, you will have to invest Rs 24,500 to build Rs 40 lakh in 15 years, according to Arthayantra.com. However, if you are looking to invest in an aggressive instrument with is likely to give you a 15% return, you per month contribution to build the amount will fall to Rs 12,700.
Investment mix to us
You can use a mix of instruments such as equity and debt. Considering that it is a long-term goal, you can opt for higher exposure to equity. If you are not able to decide the right mix for your investment, you may want to seek help from a financial planner or a financial advisor. You can use the same strategy to build the full corpus if you have the income to build it. Use the power of compounding to build your dream house.