Invest Young

Any time is a good time to invest; but the benefits of investing in one when you are younger, are numerous. Believe it or not, if you are 25-30 and in your first job, you can buy a house and have it repaid by the time you are 40. Be debt free from then on.

When you are younger, the repayment tenure offered by banks is longer as you have age on your side. You can always make sure that the loan is paid up as your career and income rise. Also you can swap to a larger property as your career progresses.

It is advisable to buy a home early on in life when one’s financial commitments are controllable. For youngsters in their first job, it is an impressionable time. It creates a forced saving and the investment also gets time to appreciate. What’s more, you can save tax under section 80C.

How much can you afford?
Check your assured cash flows-don’t be overly optimistic and don’t borrow on optimism. Provide sufficiently for your monthly expenses. Keep some margin for unexpected bills. Leave some aside for interest rate fluctuations and emergencies. A good thumb rule is to keep at least 50-60% of your income for all these expenses and repay EMIs from the balance. An advantage while investing young would be, if your income increases, your repayment capacity also improves.

Loan eligibility:
An applicant’s repayment capacity is the most crucial determinant of his loan eligibility. If a borrower doesn’t have sufficient funds to make repayments, it is a worrisome situation for both the borrower and the lender. The thumb rule goes that the EMI of your home loan must not exceed 40% of your gross monthly income. This way you can meet your other monthly expenses and commitments; yet sail smoothly through the debt period. The other assets and savings that you own will indicate to the bank that you have other resources to fall back on in times of financial crunch. Your credit history details will reassure the lender that you will not default.

The simplest technique to enhance loan eligibility is by clubbing incomes of spouse. If the income of father, mother or son is pooled in the family income then also it enhances the loan eligibility. Enhance your home loan eligibility by opting for a higher tenure. The EMI that is due declines as the tenure increases.

When computing your loan eligibility, the lender simply wants to ensure that you can comfortably repay the loan amount. In a nutshell, repayment capacity is based on applicant’s income, assets, liabilities, job stability and credit history.