Let’s say you to want to buy a home in the next few years worth Rs 1 crore. You will need to account for:
- Downpayment: An amount of 15 -12% or Rs 20 lakhs to make the down payment.
- Income Tax Proof: that you earn enough to pay the monthly EMI’s on the balance loan of Rs 80 lakhs or about Rs 80k per month.
Most folks who want to buy a house earn enough to pay the monthly EMI of Rs 80 but don’t have Rs 20 lakhs for down payment. A SIP can help you accumulate enough money over the next 5 years to makeup the shortfall in downpayment as well.
Okay, but how ?
Assume that you have bought a house. It’s just that instead of paying a loan EMI of Rs 80, you invest that money in a monthly SIP. If you continue doing this in balanced equity fund , you can have approximately:
- Rs 36 lakhs at the end of 3 years, or
- Rs 68 lakhs at the end of 5 years.
Now, you not only have more money for downpayment but also have some left over for interior decorations.
But wait, what about house rent of Rs 30k that I have to pay every month ?
Yes, if you are paying house rent and cannot afford to invest Rs 80k, let’s look at the alternate scenario scenario. Rs 50k can become:
- Rs 22 lakhs at the end of 3 years, or
- Rs 42 lakhs at the end of 5 years.
So yes, if you want to buy in the next couple of years on a loan but don’t have the money yet, start today instead of leaving it in the bank or in an FD.