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If one wants to avoid getting entangled in the emotional aspects of real estate investing & make financially sound decisions , it is imperative that these real estate myths be recognised & dismissed. In this info-bite, we will debunk a fondly held myth in respect of property investment.
It is true that home loans are low cost. But, the fact is, there is still a cost – a huge cost! Even if the interest rates are low, the absolute amounts are huge. For a big home loan, the monthly payout would be substantial for a longtime – say 20 years. We had shown that for a Rs.1.5 Crore loan, one would be paying Rs.1.94 Crore as interest ( if interest rate is 10% pa, over the years ).
Any disruption in income, would cause problems – especially for those who have multiple home loans. It is a huge gamble one is indulging in, for a long period of time. If one encounters problems in future, it may not even be easy to dispose off the property and recover the money – as property is mostly illiquid and takes a long time to sell.
Hence, in such leverage, people are taking huge risks. They assume that their income will be stable & rising throughout life, there will not be any disruptive events in life in between, the property invested will appreciate overtime etc.
Life is never linear. It has its ups and downs. Hence, invariably people getting into such huge leverage get stuck. We have many clients who are in this unenviable situation.