Q. Which one is better; have a home loan for 20 years, or invest in stock or mutual funds for 20 years and buy a home using that money? Radhika Handoo
A. Your question is as interesting as the answer. While this would be your personal decision fuelled by various factors of influence, I would like to lay down the scenario and factors for you to consider:
– Consider how much ROI would you get from stock/MF after bearing the cost of your home rent and inflation. Would it be higher than the value of your property after 20 years (after adjusting the cost of borrowing and tax benefits on a home loan)?
– Will you get the property at the location of your choice? (Consider inflation and economic development in the play)
If the answer to above-mentioned questions is ‘yes’, then you should go for investment in stock/MF and buy your home after 20 years, else it’s better to buy your home on loan now and repay the EMIs for 20 years.
Hence, I would advise you to make your decision depending on the chances of capital appreciation of property (if you plan to buy now), approx. ROI from stock/MF, home loan interest rate, tax benefit, inflation and increase in rental in 20 years.
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