Everyone dreams of living in their own house with their name on the door. While dreaming is easy, turning it into reality is a real challenge, especially when real estate prices are increasing every day. Without proper financial planning, achieving this dream can be difficult.

Property prices continue to rise. A house that cost Rs 50 lakh yesterday might cost Rs 75 lakh today. Sitting idly is not an option in such a situation. However, with smart investments, arranging the down payment for your dream house in the next 5 years is entirely possible.

When and how to start saving?

To buy a house, the first step is to understand your needs and financial capacity. Experts recommend the 50-30-20 rule for budgeting. This means 50% of your income should go towards essential expenses, 30% for your wants (such as hobbies), and the remaining 20% should be saved or used for debt repayment.

If your goal is to buy a house in the next 5 years, it’s best to start saving now. Since buying a house is a long-term commitment, planning early will help reduce financial stress. If necessary, adjust your spending habits and increase the savings portion within the 50-30-20 rule.

How much home loan is right for you?

An important question is, how much home loan should you take? To answer this, follow the ’20-30-40′ rule:

  • 20: The loan period should not exceed 20 years.
  • 30: Your EMI should not exceed 30% of your in-hand salary.
  • 40: At least 40% of the home price should be paid as a down payment.

If you want to keep your loan burden manageable, aim to pay 30-40% of the home price upfront. This will reduce the stress of long-term EMI payments.

How much loan is right for an annual salary of 10 lakhs?

If your annual salary is Rs 10 lakh, according to the ’20-30-40′ rule, it’s better not to take a loan greater than Rs 30 lakh. At an interest rate of 8.5% for 20 years, your EMI would be approximately Rs 3 lakh per year. This is a suggestion to avoid difficulties in repaying the loan.

Banks usually offer loans up to 60% of the property value. This means you could get a loan of up to Rs 50 lakh with an annual income of Rs 10 lakh. If you plan to buy a property worth Rs 75 lakh, you’ll need to raise Rs 25-30 lakh as the down payment.

How to raise money for the down payment in 5 years?

Now, how can you save Rs 25-30 lakh in 5 years? You’ll need to choose investment options that offer good returns with minimal risk.

Investing in mutual funds through SIP is a great option. Experts recommend debt mutual funds for safer returns. If you invest in a debt fund offering returns of up to 13% annually, you can accumulate around Rs 25.35 lakh in 5 years by contributing Rs 30,500 per month. This can cover your down payment target.

Gold is another good investment option. In 2023, gold offered a return of 13.1%, and the previous year it was 26%. If you invest in gold and hold it long-term, you can earn good returns, but it ultimately depends on your personal preferences.

In Conclusion, We can say To make your dream of owning a house come true, it’s essential to plan at the right time. Balance your income, expenses, and investments effectively. By saving and investing regularly, you can easily arrange the down payment within the next 5 years.