Several Indians spend decades repaying their home loans as the loan amount of these loans can be five to ten times their annual income. With property prices rising, repaying home loans is becoming more difficult. However, you can use mutual fund SIPs to solve this problem and repay your home loan in a shorter duration.
How to invest in mutual funds with the goal of financing your dream home in 2024?
Starting an SIP with the goal of owning a house is a good idea that requires precise execution. Here are points that you must consider while investing in mutual funds through SIPs to finance your home in 2024:
- Determine the cost of your dream home and the cost of down payment: As the first step, you must have an idea of how much your dream home costs and must take note of the value of the down payment. Homeowners are generally required to pay 10-25% of their home loan’s down payment.
- Use a mutual fund SIP calculator to plan for your dream home’s down payment: If you wish to apply for a home loan in the next five years, you must start a mutual fund investment today. A monthly SIP calculator can help you know the amount that you must invest and the returns that you will earn by the end of your investment tenure.
You must keep checking if your mutual fund investment aligns with your investment goal of paying the down payment amount, and increase the SIP amount after a few years, if required.
- Start another SIP investment to close your home loan at the earliest: Once you pay the downpayment and your home loan amount is disbursed, you must plan for its early repayment. Home loan repayments can go on for as long as thirty years, eating into your savings. To avoid this, you can plan for your repayment by starting another SIP investment.
You can start investing 10-20% of your home loan’s EMI (Equated Monthly Instalment) amount through SIPs to shorten your home loan tenure by a few years. It is advisable for you to gradually increase your SIP contributions to repay your home loan faster.
- Invest in tax-efficient mutual fund schemes that help you achieve your financial objective: You must avoid setting returns as the only criterion while selecting a mutual fund scheme to repay your home loan. You must assess your risk appetite and decide on the ideal investment amount by using an online SIP calculator.
Furthermore, you must select tax-efficient mutual fund schemes that help you save money on taxes. Tax-saver mutual fund schemes like ELSS (Equity-Linked Savings Scheme) mutual funds can help you earn higher, tax-efficient returns.
In conclusion, if you wish to purchase your dream home through SIP investments in mutual funds, you must start two SIPs – one for paying the down payment amount, and the other for repaying the home loan in a shorter period.
Content Produced by Indian Clicks, LLC
