Should I use my saving of Rs 10 lakh to buy a house?

Q: I have a saving of around Rs 10 lakh. Would it be wise to use the amount to buy a house with the help of a home loan? I am currently living on rent and paying Rs 17,000 for it. My monthly take-home salary is around Rs 72,000.

A: Yes, a home loan is the only thing that I suggest people should borrow. And more so for a person like you who will be able to buy the house, live in it and save on that Rs 17,000 which is the rental outflow. Never consider buying a home as a second home or as an investment wherein you are unlikely to live. That's not a good idea.

So, in this case, it makes eminent sense. Just do your calculation. Make sure that you are not paying more than a third of your income of Rs 72,000 divided by three. So, Rs 24,000 should be your maximum EMI.

I am just framing it so that you do not lose onto the basic framework of financial prudence. So, you have to wait to buy a house wherein your down payment is such that the instalment or your EMI for the home loan is not exceeding Rs 24,000. And make sure that you are buying a house to save on the rental outflow in the near future soon after buying it.

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