The Indian film industry has taught us to value the essentials in life – Roti, Kapda, and Makan (food, clothing, and shelter). Owning a home is not only a symbol of security but also a source of pride and satisfaction. However, with skyrocketing real estate prices in most cities, buying a house has become a herculean task.
For most people, it involves taking a home loan and paying a significant amount of interest on top of the principal amount, which can eat away a major portion of their monthly income. To make this dream a reality without putting undue financial stress, it is crucial to have a solid investment strategy. In this article, we will provide you with a step-by-step guide on how to invest your money wisely and arrange the necessary funds to buy your dream home.
Determine How Much Will You Need to Buy Your Dream Home?
Before you jump into the home-buying process, it’s crucial to evaluate your financial situation and calculate your budget accordingly. Aside from the actual cost of the house, make sure to factor in any additional expenses like registration fees, stamp duty charges, and interior design costs. These fees can add up quickly and won’t be included in your home loan.
It’s also essential to consider the future value of your dream home by factoring in the inflation rate in real estate. Reports indicate that the average price of homes in the top 7 cities could rise at an annualized rate of 3.5% for the next decade. To afford a home that costs 70 lakh now, you’ll need to accumulate Rs. 1 crore if prices continue to rise at a similar rate each year.
Figuring Out Monthly Investment Amount Needed to Collect the Down Payment
The next step in realizing your dream of owning a home is to determine the monthly investment amount required to accumulate the down payment. This step is crucial to your investment strategy since it sets the pace for achieving your objective of becoming a homeowner. To compute this amount, several variables need consideration, including the property’s cost, down payment percentage, and the time frame within which you wish to make the purchase.
Additionally, it would help if you evaluated your current income and expenditures to determine a reasonable amount that you can allocate each month towards this goal. Once you have a clear understanding of the monthly investment amount required, you can begin exploring different investment options that match your financial objectives and risk tolerance. By employing the right investment tactics and a disciplined approach, you can transform your dream of owning a home into a reality.
Investment Options That Can Help You Buy Your Dream House
- Equity-Oriented Mutual Funds
Equity-oriented mutual funds are an excellent investment option to consider when saving up for your dream home. They are a type of mutual fund that primarily invests in equity shares of various companies. Since they have the potential to generate high returns over the long term, equity-oriented mutual funds can be a viable investment option for those looking to build wealth steadily.
However, it’s worth noting that investing in equity carries some risk since stock prices can be volatile, and there is always the possibility of losing money. Therefore, it’s crucial to have a sound investment strategy in place and to do thorough research before investing in any mutual fund.
- Go for a High-Yield Savings Account
If you are looking for a safe and low-risk investment option to save for your dream home, a high-yield savings account is an excellent option to consider. The best savings account interest rates in India currently range from 3% to 7%, depending on the bank and the type of account. While the interest rates may seem low compared to other investment options, the advantage of a high-yield savings account is that it offers guaranteed returns, and your principal amount is insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs. 5 lakhs. Additionally, you have the flexibility to withdraw your money anytime without any penalties or fees.
- PPF and EPF
Public provident funds (PPF) and employee provident funds (EPF) are also attractive investment options to help you get good returns on your investment while simultaneously saving taxes. Investing in these schemes offers tax deductions under section 80C, making it an effective way to save on taxes. The interest rates for these funds are 7.10 percent for PPF and 8.10 percent for EPF, which is above the current inflation rate, making it a viable option for building wealth over time. These funds are ideal for risk-averse investors who prefer steady returns over high-risk investments.
4.Try a Systematic Investment Plan (SIP)
Investing in a Systematic Investment Plan (SIP) is an excellent way to invest in mutual funds regularly. With a minimum investment of Rs 500, you can invest in a mutual fund scheme via SIP and benefit from the power of compounding and rupee-cost averaging. The SIP investment strategy allows you to invest a fixed amount regularly, regardless of market conditions, ensuring that you buy more units when the market is down and fewer units when the market is high.
This can significantly reduce your overall investment costs and help you accumulate wealth steadily over time. With the flexibility to invest small amounts and the potential for high returns over the long term, SIPs are an ideal investment option for those looking to achieve their dream of owning a home.
Making your dream home a reality doesn’t have to be an impossible goal. By understanding the investment basics, shopping around for the best deals and utilizing the right resources, you can make your vision of a perfect home come true. Don’t let fear of the unknown prevent you from achieving your dreams—invest in your future today! With a bit of research and preparation, you can easily make your dream home a reality. So what are you waiting for?