Planning to buy your own house? That’s a big step. Thinking of utilising your future savings to fund your dream home?
Wait! Dipping into your savings to buy a new home is one of the ways to go about it. However, as the saying goes, don’t put all your eggs in one basket. You should avoid depleting all your savings just because you’re buying a home. Let us tell you how you can balance your savings and your Home Loan payments.
It is important to have a certain sum of money salted away for any emergencies and unplanned needs. What if you need finances for an impromptu, unavoidable travel plan?
Additional Reading: Savings And Investments; Two Sides Of A Coin
To be able to cater to sudden financial needs and still fulfil your financial obligations, here’s what you can do.
- Down payment? Emergency Fund to the rescue!
Well, not exactly. You should stay far away from your emergency fund if you are looking for money for the down payment on your Home Loan.
Depending on your investment horizon, plan ahead and save up for that down payment with a short term Debt Fund.
Additional Reading: How To Build An Emergency Fund
- Invest to cover a part of your debt
It’s a good idea to divert some of your funds into a long-term financial investment product. For instance, putting Rs. 3,000 per month in an Equity Mutual Fund could yield you substantial returns after a period of time which can cover a portion of your loan debt.
- Got an increase in your salary? Boost your savings with the surplus
As and when you get an increase in your salary, consider diverting the increment into a Debt Fund.
Additional Reading: Introduction To Debt Funds
- Plan for Home Loan prepayments
You can use the invested money to prepay your Home Loan once a year. It will make a difference to the principal amount of your Home Loan.
With these tips, you won’t need to put the brakes on your savings and investments and can comfortably enjoy the freedom that comes with owning a new home.
Additional Reading: Have your read our Home Loan Handbook?
Need more advice?