The Rule Breakdown

3: Total House Cost 3x Annual Income
- The total cost of your house should not exceed three times your annual income.
- Example: If your annual income is10 lakh, your house should cost no more than30 lakh.
- Why? Keeps your financial commitments manageable, avoiding the strain of an oversized mortgage.

20: Mortgage Tenure 20 Years
- Aim for a mortgage tenure of 20 years or less. Shorter loans mean less interest over time.
- Pro Tip: If you’re a disciplined investor, you could consider a longer tenure but invest the difference aggressively.

30: EMI 30% of Monthly Income
- Your total EMIs (including car loans, etc.) should not exceed 30% of your monthly income.
- Example: If you earn7 lakh/year (~?58,333/month), your EMI should be17,500–?20,000 max.

40: Down Payment 40% of House Cost
- Make a minimum down payment of 40% of the house’s cost.
- Why? Reduces the loan burden and interest paid over time, increasing financial security.

Key Benefits of Following This Rule

• Peace of Mind: Avoids the financial strain of overextending yourself.
• Faster Loan Repayment: Encourages quicker repayment, reducing interest costs.
• Room for Emergencies: Limits monthly obligations, leaving room for other expenses or savings.
• Long-Term Security: A larger down payment means lower monthly payments and reduced risk of default.

Real-World Challenges and Tips

• High City Prices: In cities like Mumbai or Delhi, it may be hard to find properties within these limits.
• Solution: Consider renting or moving to suburbs or smaller towns until you save enough.
• Dual-Income Households: If both spouses earn, base EMI calculations on one person’s income to safeguard against job loss or career breaks.
• Discipline is Key: Resist the temptation to stretch budgets for a larger house.

Final Thoughts

This rule is a conservative yet practical approach to home buying. It prioritizes financial stability over indulgence, ensuring that your home remains a blessing, not a burden. Always adapt the rule to your unique financial situation but stick to its essence for a stress-free homeownership experience.

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