Does buying a house early on in your career make sense?
For most of us, a house signifies a significant milestone. Hence, most of us aspire to buy a home as soon as we start earning.
Agreed, there's an emotional side attached to this. And of course, you want to make your parents proud. But is this a wise decision to make when you start your career when your salary is low?
Probably not. But again depends on your salary too. How so?
Ideally, you should buy a house, when you can ensure a high repayment rate, by increasing your annual payments between 10-15% each year. And for most of us, our starting salary is barely enough to save, pay for utilities and enjoy life.
Hence, if you can ensure that you can increment your annual repayment by this rate, and also save for emergencies, and pay for all utilities, please go ahead and buy your dream home.
But how does higher repayment impact loan repayment?
Look here:
The last column here signifies the amount you can save when you are repaying your home loan by increasing your repayment by the given percentages in first column.
That is massive, for 20%.
Generally, here is how your payments pan out as a proportion between interest and principal over the loan tenure:
So can you buy your home? Let us know by replying to this email.
Cheers!
End-Week Wisdom:
“There is a high probability in my mind that the market at best is going to be kind of flat for 10 years. Sort of like 66 to 82 time period.” - Stanley Druckenmiller
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