<div><p><strong>By Sunil Dhawan</strong></p><p><strong><em>Manoeuvring between different mutual fund schemes for maximising corpus and not just for arranging down payment should be the approach. Here’s how. </em></strong></p></div><div>One of the first big ticket expense that most of us face in our life is owning a home. To own a roof over one's heads is certainly not a tough job considering the financing option available these days. Buy it outright if you have the funds at your disposal else borrow from bank or other lending institutions. Presently, home loans are anywhere between 9.55-10 per cent per annum calculated on monthly reducing basis.</div><div> </div><div><strong>How much of self-finance</strong>: Home, however, cannot be entirely financed by lenders. As per new RBI rules, one has to pay-up at least 10 per cent (earlier it was 20 percent) of property value as down payment to the lender and the balance i.e. 90 percent can be financed. This holds true if the loan amount is less than Rs 30 lakh. For loan amount between Rs 30-Rs 75 lakh, the minimum down payment is 20 percent of loan amount, while for loans above Rs 75 lakh, the minimum down payment is 25 percent. So, on a Rs 60 lakh property, the down payment comes to Rs12 lakh, while the balance Rs 52 lakh can be availed as loan. </div><div> </div><div>If you are 3-5 years away from owning a home, start investing towards creating a corpus for the down payment. Firstly, fix a budget for the home. Estimate the down payment amount and then find out how much you need to save each month towards it. Ideally, do not aim for securing the mandatory 10/20/25 percent margin which the bank would seek as down payment. Use the financing option to bridge the gap and rather not depend on it entirely. After all, lesser the loan amount, less will be the interest burden and that much less will be the final cost of your home. </div><div> </div><div><strong>Where to invest</strong>: If you have already arranged or accumulated the amount for down payment and the search for the right house is still on, better to put the amount in a liquid fund or a short-term bond fund. The volatility in such funds is least and will help to preserve the capital. </div><div> </div><div>If the horizon is anywhere 3-5 years, a bit of exposure to equities helps. Choose at least two balanced mutual funds with more than 65 percent exposure to equities for tax effective high returns. Balanced or hybrid funds exploit the potential of both debt and equity asset classes to generate returns. Start systematic investment plan (SIP) in them and opt for the growth option in them. </div><div> </div><div>Another alternative for saving for house if horizon is around 5 years could be through equity linked savings scheme (ELSS). This would appeal primarily to those looking to save tax on their investments. ELSS mutual funds schemes have a lock-in period of three years hence each SIP amount too gets locked in for that period. Therefore, in ELSS if the goal is to save for house, do not initiate SIP rather save a lump sum. </div><div> </div><div>Investing in the right scheme may not be sufficient. You need to strategize your investment moves thus exiting the investment is equally important. At least a year before reaching your goal, move your funds into less volatile liquid or debt fund. This helps to preserve the capital accumulated.</div><div> </div><div><strong>End note:</strong> Life on rent is very different from living in a place which you could call as your own. The sense of ownership overpowers all other things especially when the trade-off is between renting and owning. Renting after all involves frequent changes in residences at the whims and fancies of the land lord and is sure to witness constant increase in annual rent revision.</div><div> </div><div>With several financing options and the property prices lying flat, it's time to bargain hard with developers and get a home of your own. But make sure you do not over stretch your EMI amount. After all there are other goals in life too that needs your attention. Prepare a partial repayment plan simultaneously to finish off the home loan as early as possible to lower your interest burden.</div>
