After a lot of rumination, I considered buying a flat in Nandi Wood housing.
The flat will cost 40L+ which will put me under the EMI of around 45k+ according to the prevailing interest rates.
But I am in complete dilemma nowadays, whether to buy a house or not.
I came across two blog posts:-
Benefits are listed out as:-
- will save on rent
- will build an asset
- may seem higher now but as the time goes by the EMI sum % of your income will decrease
This blog is a straight mockery of the people who are buying house by taking hefty loan. Following are the arguments:-
- Paying hefty EMI every month will deprive of the much needed cash at the onset of your living
- House may not prove to be an investment - classic case of
- With the house loan you loose mobility and risk taking ability
The inference that can be drawn from these two mindsets is that it is always better to buy a house early in your career and it is also not desirable to be burdened by the heft EMI amount of the home loan.
The best case scenario is that you are in 20's and you have enough cash to completely buy the house, no loan, no EMI.
But if this is not the case then certain question arises, what is the extent until which it is financially and logically Ok to be burdened.
After hours of calculation, I derived on the generic method to determine if one is eligible to go for the loan.
If suppose your in hand income per month is X and your average maximum % expenditure for the forecast of next 2-3 years is 30% of X (assume various cases like , you getting married or having children or buying a car etc etc) then EMI should not exceed 40% - 50% of X where assuming 20-30% of X as your saving (You need to have some liquidity) . Please note that if the % expenditure is more that 30% of your in hand income then better pay attention to that.
If you are buying a house then take loan for the amount which can translate to EMI of not more than 50% of your income. You should put in the cash for the rest amount.
Well I have decided to hold my decision of buying the house.
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3 comments:
You are discounting the progress that will happen between now and 10 years.
a. New and Better materials
b. New cities - Greener, much more integrated, secure, less pollution
c. New requirements from a house - Smart House etc.
One can easily see a house made in 1998 and decide whether you would live in it or not? There's a huge difference between a house made in 1998, 2008 and types there will be in 2018.
The choice is whether to be stuck in today's houses or wait for breakthrough technologies to redefine what a house means.
Bottom-line - I don't like the types of houses they build in current times. They are stuck in 20 year old type usage models - 2/3 bedrooms, kitchen, drawing room, hall, parking etc. All this is highly inefficient and not desirable. The question is whether you want a same house as last 5 generations have been building OR you'll wait out to own / build something much more meaningful.
It's a whole different story if you plan to sell the house later. You might as well invest in infrastructure funds and live in rented house.
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On a sidenote, 20% for emergency saving is not enough. Here's a quote from a farmer hit by Bihar floods -
""I presented my buffalo to the boatman in exchange for a place in his boat since I don't have any money," Shambhoo Yadav, a rescued villager said."
This is not to scare you for taking risks, but to be aware of them while making the choice and therefore be ready to face any of its consequences.
The comment is almost as long as the post itself :-)
I would rather live in a house made in 1980... they were lavishly made... and they were SINGLE Storey with a huge lawn. Unlike today's houses which are no longer a house but a place to spend the night... compact, flat kinda system.
Basic requirement from the house remains the same and will be same in future.... You can always modify the house when required.
Anyway, 20% Saving is liquid saving i.e. hard cash... which may or may not be enough depending upon the requirement..... that is why this is general guideline and not a hard and fast rule. You can also argue about limiting the total expenses to 30% of in hand income ... even Suze can argue about it ....
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