On home loans

Use inheritance to buy a home

I recently received a lot of funds by way of an inheritance from an aunt, who passed away recently. Around the same time, I finalised a deal on an independent house. The loan process has also been initiated, and I am in a dilemma as I now have the option of making an outright purchase rather than take a loan. Some have suggested that I put the money inherited into equities and go for the loan. What should I do?— Swathi M.

It is indeed a difficult situation. However, you need to decide your current priorities. Here are some options you could explore.

You may invest the entire inheritance into equities and let it simmer over a span of 10-12 years before you reap the benefits, while you go ahead with the plans of a loan.

You may divide the inheritance into two. Invest one half in mutual funds and equities. The other you may use to pay a large down payment to reduce your loan amount.

You could make an outright purchase and allocate the EMI you had planned to set aside for the loan towards equity investment.

You may buy two houses and let out one for rent while you buy the other on loan. Use the rent money to pay off your EMIs. Investing in real estate is always a good option, provided you do it judiciously.

Both the stock market and the loan market are prone to volatile changes, hence evaluate all your options before you take a call.

(Mr Adhil Shetty, CEO, Bank Bazaar.com, will respond to questions on home loans. E-mail questions to blproperty@thehindu.co .in.)

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