How to plan your home loan monthly installments?

Are you planning to apply for a home loan or are you an existing home loan borrower? If the answer to either of the questions is yes, then you must be aware that monthly instalments of the home loan are a huge financial takeaway from your monthly earnings. It is necessary to manage your home loan EMI appropriately so that it does not cause any problems in your financial life.

If you have the money to buy or build a house, you would not require a loan. However, when you don’t have ready funds, you can seek a housing loan. When you take a home loan, you have to decide on the loan amount, based on your repayment ability. To help you plan your finances properly, we recommend you calculate the EMI that you will pay every month during the tenure of the home loan taken. EMI calculation helps you to plan your finances practically. To calculate your EMI now, use Indiabulls Home Loan EMI Calculator.

Once the housing loan’s EMIs begin, you should cut down on your monthly expenses to repay the loan as any default in EMI may lead to bitter consequences and can even affect your credit score. It is better to plan your home loan monthly instalments (Home Loan EMIs) in a way that they do not cause a financial crisis to you and your household. However, there are a lot of factors which need to be considered as you plan to repay a Home Loan EMI. Some of them include:

• Earnings:

If you have a stable income, then you can opt for service heavy EMI option as you and your lender can safely predict that with time your income will increase. Make sure that your EMIs don’t affect your monthly household expenditures and investments. Since housing finance companies usually consider 40-45% of your income when deciding on your EMI payments, an EMI amount which also lets you make at least 15% savings from your monthly earning is considered ideal.

• Expenditures:

Play safe when deciding on your home loan EMI to keep paying on-time. Take into consideration your current and potential future expenditures, such as family expenses, possible medical expenses, kids’ expenses, lifestyle expenses, personal expenses etc. Also, make sure your dedicated EMI spending should remain unaffected by surges in inflation over the years.

• Age:

Your age influences your loan’s rate of interest. If you are in your 20s’ when you start a loan, then you can always afford to pay heavy EMIs. Later in life when you have more responsibilities, EMIs feel less burdensome as your salary increases. However, this may not work if you start a loan in your 30s’. If you start a loan later in life, you will have to balance it well with your other spending too.

• The rate of Interest (ROI):

ROI of your loan or housing loan interest rates shall not remain the same throughout your loan tenure. Nowadays fixed rate loans are not preferred rather MCLR-linked home loans are preferred. Fixed rate home loans have a significantly high Rate of Interest when compared to MCLR-linked home loans. However, MCLR linked loans are floating rate loans which inherently means that the ROI on these loans will change when the housing finance company chooses to change it. Thus, your EMI amount over the years will vary every time the ROI changes, and so, while planning your EMI amount and tenure, you should be aware that in the future you may have to pay increased EMIs or pay the same EMI, but for an increased tenure.

• Overall Considerations:

You should consider your present income, lifestyle, the standard of living, increase/decrease in income, ability to switch jobs, your career choices in upcoming years, your goals, future expenditures and retirement plans before planning your EMIs.

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