Home loan rate at its lowest: Is this the right time to buy a home?

Banks are offering discounts on home loan interest rates during the festive season. The festive offer is around 6.4% to 6-7% interest rate. SBI and HDFC are giving home loan offers of up to  6.7% interest, while Kotak Mahindra is giving loans at an even lower interest of 6.5%. Is this the right time to leave a rented house and buy your own home?

Money9 Helpline hosted Harshvardhan Roongta of Roongta Securities to resolve the queries related to buying a home during the offer season.

“What should be your strategy? Should you take advantage of the offers or stay to your own personal finance dynamics. The rate is for a limited period. For an individual who was already looking to buy a home for some time, he/she can take advantage of it. But if you are someone who will now start looking for a home because interest rates have fallen, then I would suggest not to take that strategy,” Roongta said.

Edited excerpts

Vivek Goenka: Which is better- taking a home loan to buy a home or investing money in mutual funds, and staying at a rented accommodation?

Roongta: You have to assess the percentage allocation of your assets, how much is there in financial assets, and how much is in real assets. In most cases allocation is large in real assets because the ticket size is big. Individuals have 70-80% of their net worth in one home only. If you are comfortable in paying EMI and find your loan quantum comfortable, then should you continue with the loan and also build your financial assets. You can also easily liquidate financial assets which is not the case with real assets. It is better you maintain a balance in your portfolio.

Also, make a decision based on your cash flows and not just equities.

Bapa Saha: Please discuss various ways to reduce home loan EMI and tenure

Roongta: If you want to reduce EMI and tenure, a lot of people do part pay and repay a big chunk of the amount. WIth part pay, you can reduce tenure and EMI.

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