1. Current value of house: This will be the cost of house if you were making an outright purchase (i.e. without taking a loan). Define your specific goals for buying a house. Know what you want in terms of location, size, and budget. Keep your other financial goals in mind. Do not dip into your emergency savings or retirement planning kitty to fund a fancy house.
2. Current value of house (if you are taking a loan): Enter the down-payment amount you wish to make. The balance cost of the house will be funded by home loan. Determine how much you can comfortably afford, taking into account your income, existing debts, and ongoing expenses. You should not overextend yourself, in financing your house through home loan.
3. When you should buy your house: It depends on your and your family’s plans and aspirations, and your current situation. If you are paying a high amount on rent, then you may feel the need of buying your house as soon as possible. However, you should compare the EMI with the rent you are paying. If the rent is lower than the EMI, which is the usually the case, then you may be better off, delaying your house purchase so that you give your investments more time to grow. You can evaluate different scenarios in our home purchase calculator by increasing the value and the year. Then you can make informed investment decisions.
4. What should be the "Expected Rate of Return": The "expected rate of return" will depend on the type of investments. Different categories of mutual funds have different risk profiles; risk and return are interrelated. You should invest based on your investment tenure and risk appetite. For example, if you want to buy your house after 10 years, equity funds can be suitable investment options. If your investment tenure is 3 to 5 years, you may want to invest in hybrid funds. If your investment tenure is even shorter, then debt funds will be suitable for you. You should consult with your financial advisor if you need help in making investment decisions. You can refer to long term returns of mutual funds from different asset classes / categories to form your return expectations. It is important to refer to long term asset class returns because short term returns can be misleading.
5. What should be the expected “inflation in price”: This depends on the location of the property. In some locations, prices have appreciated rapidly, while in other locations prices have increased moderately or remained stagnant. You may consult real estate brokers to get more insight, but it is very important to do your own research. You may often hear that, in such and such locations, prices have doubled, but over what timeframe? If prices have doubled in 10 years then the inflation rate is about 7%. How much returns you can get from your investment over the same period? Research about property market in your desired location, current values, and potential future developments. You should try to be analytical and make informed investment decisions.