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Why One Should Pay EMI for 20 Years to Own a

  August 14,2021

Why One Should Pay EMI for 20 Years to Own a Dream Home, When He Can Live Like a King, if He Opts for 5 Years EMI!!!

This is the thought process came after seeing the advertisement from the real estate owners in newspaper and television, why you should pay RENT, when you can buy a House. This is the biggest LIE, where you RENT is inside the city and where you can buy is outside of the city. Yet people are more concerned about owning something rather than how difficult to commute every other day!

We as a human being come here as a temporary resident not a permanent one. Whenever existing itself is not permanent why one should give so much of importance to owning something, especially they can’t afford or if it is still possible through home loan the kind of hardships they can undergo is mindboggling.

This thought process forced me to write something which is possible and live happily provided if we are not emotional. Whether the house is own or rent the experience inside the house will be one and the same. It is only our mindset makes all the difference, there will not be any difference when it comes to house function is concerned.

I have two options today. Either I should buy a house which costs me 2.5 Crore if I add all the charges or I can use the same house as a tenant for 50,000 Per month. Since I am practical and non-emotional I chose the second option.

In the first case, let me assume am paying EMI for 2.5 Crore loan amount, I have to pay 2.5 Lakhs per month, first of all, no one give 100% loan just for the calculation purpose I assume. I end up paying 2.5 Lakhs*240 Month = 6 Crore, then only I can claim that, it is my house after 20 years.

Tenure 5 Tenure 5 Tenure 5
SIP  ₹    2,00,000 SIP  ₹         2,00,000 SIP  ₹    2,00,000
Returns 10% Returns 12% Returns 15%
Future Value 1,56,16,476 Future Value 1,64,97,273 Future Value 1,79,36,338

The second option is chosen by me and I am paying 50K as Rent and saving 2 Lakhs SIP per month for the next 5 Years. My investment towards SIP for the next 60 months would become 1.2 Crore. If I assume 12% returns conservatively then the value will be 1.65 Crore and if I assume more practical returns, then it would be 1.8 Crore at the rate of 15%. I will take 12% as a conservative number, to drive the concept rather than the value, so I chose moderate as 1.65 Crore.

In the next 5 Years, if I assume 5% as an increase, then it would be 64,000 rent after 5 years. If I withdraw 65K per month to feed the rent after 5 years because I opted 5 Year pay instead of 20 Years typical traditional housing loan. Keeping 1 lakh which means on top of 1.65 Crore, I am doing 1 lakh SIP after 5 years, instead of 2 lakh before. If it continues, I can move the house whichever location or city without getting emotionally attached. The kitty is always at my disposal whenever there is a situation demands and the value of this money is much bigger than the value which I sold it after 20 years when I buy a house. More than the best possible solution, we are emotionally attached and love to suffer!!!

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