(iStock)
(iStock)

How you can build a home loan payment kitty

  • To build a down payment amount for your dream house, you need to decide the value of the property and decide a time limit
  • Considering that building a kitty for down payment on a home loan is a long-term goal, you can opt for higher exposure to equity.

Calculate the amount

If you’re planning to take a home loan, you must know that banks usually expect you to make a down payment. To build a down payment amount, you need to decide the value of the property and decide a time limit, say 15 years. Then look at the current market rate of a property you would like to buy. Remember the value of the property will increase due to inflation. Assuming 5% inflation, the value of a property priced at 2 crore today, will cost you around 4.2 crore in 15 years. 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 40 lakh in 15 years.

Work towards your plan every month

Now that you know you have to build a 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 24,500 to build 40 lakh in 15 years, according to Arthayantra.com. However, if you are looking to invest in an aggressive instrument which is likely to give you a 15% return, your per-month contribution to build the amount will fall to 12,700.

Use a mix of instruments

While saving up for your dream house, you can also use a mix of investment instruments such as equity and debt. Considering that building a kitty for down payment on a home loan is a long-term goal, you can opt for higher exposure to equity.

If you are not able to decide the right mix of instruments, 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 the kitty.

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