If you are planning to take a Housing Loan – some important things to consider

 8^th November 2021

If you are planning to take a Housing Loan – some important things to consider

Dear Fellow Travelers,

Namaste! In the olden days, it is said they were trading GULAM. There were markets for GULAM and you can go and buy GULAM of your choice. In the modern world, they have twisted the game. The people are becoming GULAM out of choice and the top guys are exploiting them. Ask students of various faculties and their main goal is to get a well-paying job. Then take a housing loan and settle down. I am making it simplified but overall the things are like this only.

Say you are planning to take a HOUSING LOAN. I have some facts to share with you.

1.  It's not your house till you pay the LOAN. It’s BANK’s house. You are paying maintenance of the BANK’s house and interest to the BANK. Don’t you think BANK is a better business? So, next time you see ADVERTISEMENT that a couple is shifting to THEIR HOME with a Housing Loan – be ALERT.

2.   Let us see the typical Home Loan Calculation: -

Say you want to buy a home for Rs.1.25 Crs. Your parents and your in-laws and are giving Rs.25 lakhs and you are taking Rs.1 Cr loan. It means you will be paying Rs.11.12 Lakhs as yearly installments to HDFC for 15 years loan at 7.5%.

They will make sure that you buy TERM INSURANCE for Rs.1 Cr to cover their LOAN. So, their insurance company also gets business and you pay an additional Rs.10000 per year.

You will be paying Rs.45000 per annum as maintenance to the society and BMC property and water taxes.

So, your total FIXED Cost of staying in your own house is Rs.11.12 lakhs + Rs.10000 + Rs.45000. Total 11.67 lakhs. It means a monthly cost of Rs.97250 per month.

3.   Let us See your income side now: -

Say you are lucky and you have a well-paying job of Rs.2 lakhs per annum. It means you will have a take-home salary of Rs.1.5 lakhs per month after all deductions. In India, you need to be in the upper 10% of the job goers to get this salary. 

After paying Rs.97250/- you will have Rs. 52750 in your pockets to spend. Now, the next thing will be to go for an Rs.15 lakhs car and you will be paying Rs.30000 as monthly installments for 5 years. So, you are left with 22750/- out of Rs.2 lakhs. Just 11% of your income. Now, you can’t live life with this kind of money. So, the Banks will come and give you a CREDIT CARD. They will teach you that it is better to have more than 1 card so that you can rotate your credit to other cards, in case you can’t pay. So, the person ends up in a new loop of 3% per month interest on the CREDIT CARD pending amount.

4.   The REAL GAME starts now: -

Your company knows that you are paying so many installments. They also know your disposable income. Now, your boss will ask you to come ON SUNDAY / work till midnight / asks for other favours in case of FEMALES (remember MEETOO campaign in the recent past). They have to sell their souls for their EMIs. 

All your CREATIVITY goes how to pay the loan on time. You will be forced to take the nonsenses of the people around you just because you have a liability to pay the EMI each month. 

The immediate effects are felt on the HEALTH and the PERSONAL relationships. The house which was bought to be happy becomes the major source of unhappiness. 

5.   Standard of Living: -

I have seen many guys are using their houses and their cars as proof of a better standard of living. If you have read the above 4 points – do you think this guy can ever have a better standard of living?

All his BETTER STANDARD is an outside show only. You can’t become RICH by spending money like RICH. You can become RICH if you know how to earn money like RICH. But your thinking abilities are gone due to the loan burden.

6.   Now, comes Property is the best investments: -

You can fool normal people like anything by changing the terminology. Your home where you are staying is not your PROPERTY. It is not your ASSET as you have been made to believe. It’s your LIABILITY (you are paying maintenance and EMI).  

Let us see investment logic. You have paid Rs.25 lakhs + 1.75 Cr (Rs.97250*180 months). You will be paying Rs.2 Cr. For a property of Rs.1.25 Crs. I am not adding Rs.15 lakhs of FURNITURE or INTERIORS in this.   

If we take 5% inflation in property prices – your property will be worth Rs.2.60 Crs in 15 years. So, a new home in your AREA will cost Rs.2.60 lakhs. Your home is 15 years old. Do you think you will get Rs.2.60 Crs? You will get Rs.2.25Crs to Rs.2.35Crs only if at all your society is well maintained. It means 10-15% appreciation maximum in 15 years.

All the tensions and pains for 15% gain in 15 years!! Do you think this is worth it? 

7.   Better Alternative: -

Out of Rs.1.5 lakhs salary spend Rs.50000 on good quality comfortable life. Rs.25000 rent for a 500 Sq ft apartment.  

Balance Rs.75000 invest in direct Equities. No mutual funds and SIP business. So, you will be investing Rs.9 lakhs per annum. Do this for 10 years at least. You will have a corpus of Rs.1.87 Crs if your investment moves up at an average of 15% only.

This way you will not be touching your parents and your in-law’s retirement corpus of Rs.25 lakhs and you will have a ton of money for them also.

Now, if you take a housing loan - you will have an income of Rs.25 lakhs per annum from your investments and you will be paying Rs.22 lakhs on your loan of Rs.2.60 Crs. Your monthly income would have also moved up to Rs.5 lakhs by now. 

If you are staying in METRO cities or TIER two cities – ample traveling options are available. Don’t waste money after CAR and CAR loans.

8.   The END RESULTS: - 

If you follow the above steps you can expect the following end results.

1. Stree Free Life is the biggest plus. Bonus is good relations as you will not have to say NO to your near and dear for their expenses or their needs.

2.   You will be having a NET SURPLUS in just 10 years. Now, you can go and buy a bigger house or start your own business with the capital.

3.   Since you have NET SURPLUS in your pockets – your will not compromise with your principle and sell your soul.

4.   Your confidence will be high and your will attract more and more like-minded people in your life.

5.   The biggest advantage will be – since you have postponed the urge to splurge money in your initial life – your kids will also learn better financial discipline and there will be a healthy attitude towards money.

What NEXT?

I have followed all the above STEPS and now I am enjoying the END results. I am having the last laugh over all the people who have not followed the BUFFETT way. I am grateful to BUFFETT for teaching me the real financial secrets. From day one I have been doing my business without compromising on my terms and conditions and today also the same style continues. This gives me a lot of HAPPINESS.

Make your choice.

Follow me on Twitter @hiteshmparikh Or on Whatsapp - +91-9869425399.

Live With Passion…Invest With Passion.

Hitesh Parikh.