How much mortgage payment can a person afford for his house? It is indeed a dream for everyone to buy a house with all those super luxe amenities but there is always a question that will come in your mind. How much worth of house can I afford? This is apparently the most searched question about finance on google. So let's look at it. A typical household or an individual has all sorts of mortgages like house loan, car loan, student loan, credit card etc. So how can you really know what is the optimum price of the house that you can afford or in other way what is the maximum monthly EMI you should be targeting to pay. The 28/36 rule is what banks or lending institutions follow, and is also taken as a global standard. But what is this 28/36 rule. Let me break it down for you: The 28: It says that a household or an individual must spend a maximum of 28% of their gross monthly income on housing expenses. Housing expenses will involve your monthly payment towards principal a...

What are real estate investment trusts (REITs) and how do they work? Real estate investment trusts (REITs) were created by congress in 1960s to give all Americans an opportunity to benefit from income producing real estates. Today, nearly 40 countries have REITs and is getting more popular day by day in different countries. If I talk about India, the first listed REIT was of the Embassy Office Park in 2019. What are REITs and who can invest? A common perception that people hold is that, investing in real estate is a costly affair and it is very difficult for most people due to the liquidity constraints. REITs is the one stop solution for this. They are a good alternative to owning real estate directly. Just like anyone can invest in shares, people can also invest in REITs to earn majorly two kinds of income i.e. rental income and interest income. You might wonder where the interest came from. More often, REITs are classified into 2 categories, equity REITs and mortgage RE...

Whether to buy a house or live on rent? Life is tough and at times like this, you understand what is the importance of having a home. In this state not having a stable income and living on rent can combine to be your worst nightmare. But don't worry, we are here to evaluate a question which comes to the mind of many millennials and aged too. Should I put my life earnings in buying a house or should I live on rent and keep the lump sum money invested. Let's check that out. A typical scenario : Property on home loan: This is the approach that a majority of people take in order to buy their first home. There is nothing wrong in this, but we are here to check whether paying all that interest is making you financially better off or worse. So let us start with a typical example, wherein you bought a house for 50 lakhs and took a home loan for 20 years. Below is the loan structure: Keep in mind, we haven't considered the capital appreciation for the house. In gene...

What profession is pursued by the 10 richest people in the world? 1. Jeff Bezos: Jeff Bezos has a net worth of an astounding $131 billion. He is the founder and CEO of the e-commerce company Amazon (founded in 1994). He also owns The Washington Post and Blue Origin. Amazon made a net profit of $10 billion last year. His stake in Amazon is 16%. 2. Bill Gates: Bill Gates  has a net worth of $96.5 billion. He founded Microsoft with Paul Allen in 1975. He is also the Chair of Bill and Melinda Gates Foundation, the world's largest private charitable foundation. As of today, his stake in Microsoft is only 1%. He has donated $35.8 billion worth of Microsoft stock to the Gates Foundation. 3. Warren Buffett: Warren Buffett  has a net worth of $82.5 billion. He is one of the most successful investors of all time. He runs the Berkshire Hathaway, which owns more than 60 companies, including Geico, Duracell, and Dairy Queen. He bought a stock at age 11 and filed taxes at the age...

How is the real estate industry performing as compared to the stock market industry? We all have heard about unconventional gains in both the real estate world and the stock market. People love to diversify their portfolio in both these avenues. However, there are certain limitations in both industries. There are periods of recession in both but you can make really high gains in the stock market which is not possible in case of real estate.  To understand both these industries better let's take a look at the capital requirement, investment horizon, ease of purchase and sale, returns percentage, profit earning potential, tax implications, and skills requirement. 1. Real Estate: The real estate industry involves buying any physical property be it a commercial office space, commercial shops or residential apartment. The capital requirement in the real estate space is very high as compared to the stock market especially if there is land attached to the property. A property ...

What are the factors to consider before getting out of debt? A majority of the population does not have basic amenities like a home and so people end up taking a loan after their job in order to provide for the same. It is very clear that a loan is taken only because of the inability to shell out all your money towards buying a home. One can't have a home and have nothing to eat. So yes, one ends up paying huge interest on the EMIs. As time passes by the disposable income of people increase and then arises a question. Should I repay the loan now and prevent myself from paying interest to the bank? However, this question is not that straight. A variety of factors play a role in deciding whether you should pay off your debt or not. Here is a list of factors for in-depth understanding: The interest rate on the loan: The typical interest rate on a home loan is around 9% to 11%, which is significantly higher than what you get on a fixed deposit or a savings account. On the ...

What is the time value of money and what is its significance? Time value of money tells us that the value of a dollar today is more than the value of a dollar tomorrow. In easy language, if you are given an option to take 1 lakh rupees today or after 1 year, then you should aim to take the money today itself. The reason is that the cost of commodities rises due to inflation and thereby you are able to buy less quantity of a certain good. Another reason is that you lose the ability to earn interest on the money for 1 year. For example, Rs.1,00,000 can be put in an FD which can give a return of 7% and therefore growing your money to 1,07,000. Time value of money is sometimes referred to as present discounted value.  Now, one might question how is this concept relevant and where can it be applied. The answer is that TVM allows you to calculate the present value of any future cash flows and therefore helps in analyzing which investment or an annuity would be a bett...

What is passive income and what are a few ways to increase passive income? What is passive income? Passive income is that source of income that comes in your bank account even if  you have little or no  involvement in the source of that income  stream i.e. you might be chilling with your niggas at a  hill  station and your  bank account would still  keep getting credited each and every day without you being actively involved in the setup from where the income arrives.  What are a few ways to increase passive income? Real Estate Investment:  This is a two-way return model. The first is the capital appreciation of the property and the second is the rental income from that property. Another benefit of Investing in real estate is that the profit earned from the sale of a property comes under the purview of capital gains tax. The tax on capital gains is only 20% instead of the 30% on salaried income( earnings being grea...