Buying a house in five years sounds like a good plan. Have you thought about how much money you need to save each month to make it happen? The good news is that you don't have to rely on your salary to build your down payment. A planned Systematic Investment Plan (SIP) can help your savings grow steadily over time.
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Calculate Your Down Payment
For instance, assume that you need a house worth Rs. 60 lakh in five years' time. If you are intending to make a 20% down payment, you will require Rs. 12 lakh to purchase the house.
Instead of randomly saving money, you can work backward and determine how much you need to invest monthly.
How Much Do You Need to Invest in an SIP?
Let us assume that you can save Rs. 25,000 every month through your household budget.
You can invest Rs. 15,000 every month through an SIP and keep the remaining Rs. 10,000 in safe investment avenues for emergency purposes as well as other expenses associated with buying a house.
In case the SIP gives a yearly return of 10%, your monthly investment of Rs. 15,000 will become about Rs. 11.6 lakh in 5 years. The total investment will be Rs. 9 lakh, and the gains will be about Rs. 2.6 lakh.
It is important to note that the returns may vary, and there may be losses on investments depending on market movements.
Should You Invest All Your Money in an SIP?
No, that might not be a wise decision. In case you require the money in precisely five years, then investing in something that carries too many risks may hamper your plan to purchase a home.
A more practical way to go about it would be to first determine how much you will require for the down payment, figure out how much you can save each month, and then invest that amount.
If you wish to buy a house in five years, having a monthly target makes things easier. An SIP can assist you in saving for your down payment.
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