We can all agree that mortgage loans are the most advantageous for most of us when it comes to finally buying a home. Furthermore, the availability of long-term repayment options with durations of up to 20 to 30 years and occasionally huge loan amounts seems to imply that, at the correct LIC home loan interest rates, paying them back would necessitate a sizeable portion of our income during the years of our working lives.
If we are fortunate enough to have children, we would never want the expense of their LIC home loan EMIs to limit their capacity to seek higher education.
Realising the importance of other life goals, such as automobile ownership and child marriage, is essential. The requirement for a sizable retirement corpus is highlighted by the combination of comparably shorter work-life years and greater average life expectancy, which is happening more frequently.
We frequently find it difficult to decide which goal to prioritise because we need to strike a balance between a variety of goals and maintain our mortgage payments manageable given the current LIC home loan interest rates.
Let’s discuss how mortgage borrowers should handle their finances so they can fulfil a variety of life goals, such as the unavoidable aim of retiring, and what to do while repaying a mortgage at a house loan interest rate even if they must prioritise one goal over another.
Have all of your long-term goals—such as retiring and paying for your child’s college education—been met?
As soon as you can, spend money on something. If you start paying off your mortgage as soon as it is practical and continue to be able to do so at the LIC home loan interest rates, you will have a better chance of achieving life goals like retirement and funding your child’s further education. You would have to spend more money if you put off investing in order to quickly amass a substantial corpus.
As soon as you are able to, begin creating a corpus to allow your money more time to grow and gain from compounding. Additionally, keep in mind that you will normally need to come up with 5% to 15% in margin money even if you choose to use an education loan to pay for your child’s higher education.
A head start can mean fewer monthly investments are needed to create the goal corpus. This offers you more time to focus on other financial goals, like buying a car or paying off the current interest-rate EMIs on your mortgage.
How can I get ready for it?
Make sure to account for long lifespans and price increases brought on by inflation in your budget.The cost of inflation must be included while analysing the corpus if it is to increase as anticipated. Because inflation gradually reduces your purchasing power, a term of study or your regular expenses will undoubtedly cost much more in the future than they do now.
Therefore, remember to utilise the inflation-adjusted expenses rather than the current spending when determining the corpus for your retirement fund or the corpus for your child’s future schooling. The interest rate regime should also be considered since it will affect the LIC home loan interest rates both now and in the future.
When choosing your retirement fund, you should also take the longevity risk into consideration. The average lifespan is rising as medical knowledge advances. If your life expectancy is more than what your retirement savings would indicate, there is an elevated danger. You can lower the longevity risk by keeping a portion of your corpus invested in equity mutual funds during your post-retirement years.
investing under stress on the stock market and its cost If you were already paying down your mortgage at the current home loan interest rate, you would already be allocating a sizable percentage of your monthly income on EMI payments. Given the likelihood that you will use a major portion of your income to support other important life goals, it is imperative that you choose the right investments for wealth creation. Avoid fixed income investments when building a corpus for your long-term goals because they infrequently outperform inflation rates. The best asset type for long-term investing with a time horizon of five years or longer historically has been equity. It outperforms inflation and the majority of other asset classes over time.
Equities help investors create a healthy corpus since they are less risky and provide higher long-term returns. Due to the inclusion of both debt and equity and their primary focus on risk-averse clients, balanced mutual funds provide an alternative to investing just in stocks.
The unpredictable element of market timing is lessened by SIPs, which are routine and systematic investments made at predetermined times and intervals, such as weekly, monthly, or quarterly. SIPs encourage responsible financial management as well. They are also a superior choice than one-time mutual fund investments in terms of increasing wealth. Regardless of the interest rate on the LIC home loan, doing so would be profitable.
Which goal, if any, has to come first?
The majority of parents who cosign a mortgage fork over all of their retirement savings in order to fully fund their child’s higher education when faced with competing pressures. If your retirement fund is affected, you run the possibility of having to rely on your kids for support in your post-retirement years. If they also have loan payments to fulfil, it can have an effect on their financial status.
The lenders could be able to help you pay for your child’s future education with an education loan, just as they might be able to help you pay for your own home purchase by providing low interest housing loans. Despite the importance of each of these goals, keep in mind that they might be able to assist you with all three. Everyone but the reverse mortgage loan facility, which is in any event not very well known in our country, will reject your request for a LIC home loan to pay for your post-retirement obligations.
Therefore, while choosing one of these goals, the retirement corpus requires additional attention, even if you are repaying a low and lucrative LIC home loan interest rates. Making a retirement corpus is essential because it guarantees that you will be ready for retirement and have a sizable corpus in place when you do. The event of retirement is unavoidable, so you must be ready for it.