I have two houses in city, one in which I am presently living and the other house is rent out for 10,500 INR\month. I am planning to extend the other house for more rent from tenants. The extension cost would be around 200,000 INR but that would definitely fetch me 2,500 INR\month more rent from tenants.

For this extension cost, I am going to apply for home loan of tenure 15 years. The monthly EMI of this home loan would be around 2,000 INR/month. I have three other loans too, whose detail is as follow:

  1. Home loan on house in which I am living =7,000 INR/month(12 years remaining)

  2. Home loan on plot without tax benefits= 5,500 INR/month(14 years remaining)

  3. Car loan=11,000 INR\month(4 years remaining)

Beside this I also have saving close to 10,00,000 INR, interest on which is accumulating and I am in no mood to use that amount anyway.

My present total loan liability is around 25% of my total earnings. Now questions is, should I apply for another loan for extension of my other house for more rent from tenants?


should I apply for another loan for extension of my other house for more rent from tenants?

As you have already made up your mind not to you cash, you can apply and possibly get the loan for extension of your rental house.

If you are sure of the numbers then its cash flow positive. There is only marginal risk that you may not get the anticipated rent [generally rents would keep increasing]. Your cash reserve of 10 lacs is sufficient cover, plus your EMI outgo at 25% also look quite decent. So even if you don't receive rent for whatever reason, you are still able to meet the loan repayment obligation without much hassle.

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