Home loan monthly installments is an important part to consider while taking the home loan. The borrower should know that home loan monthly installments can take away a big part of his monthly savings and income. However, it is necessary for the borrower to manage his expenses in order to pay his monthly EMI. The borrower must know how to plan his EMI.

• The loan amount is disbursed by
  • Bank
  • Housing Finance Companies (HFC)  according to the eligibility of the borrower.
• It is provided to the borrower as and when required by the
  • Builders
  • Developers
  • Self and repaid by the borrower at the time of EMI (Equated Monthly Installments)
• It is pertinent to mention that the borrower must pay the EMI’s on time because it might affect the credit score for home loan of the borrower.
• In order to manage the EMI’s the borrower must manage his expenses

Factors to be considered while planning the EMI

Income of the Borrower

• A good earning or the better source of income is an important factor which decides your home loan monthly installments amount.
• It is necessary for the borrower to make lender believe that he has a stable job. So that the lender can trust the borrower that he will make payments on time.
• During the initial period, EMI’s won’t be a burden on the borrower but it might affect the bank balance.
• If the borrower is not having any other then the banks usually keep 40% to 45% of the borrower’s monthly earning as Home Loan EMI.
• While planning the EMI the borrower must not forget to consider that the EMI do not affect his income and expenditure adversely.

Expenditure

• While deciding or figure out the EMI the borrower must consider
  • Current expenditure
  • Expenditure you have to do in future which may affect your savings or budget such as
    • Family expenses
    • Medical expenses
    • Personal expenses etc.
• Your EMI should not be affected the ups and downs of your profession or business.
• Plan your EMI after going through all your expenses.

Repayment Capacity

• The borrower must consider hos repayment capacity in order to pay EMI on time.
• It is necessary to take EMI seriously otherwise it might put the borrower into trouble.
• Repayment capacity depends on
  • Earning
  • Expenditure
  • Saving, and
  • The budget of the borrower
• While providing the loan the lender will consider your ability to repay the loan.
• By keeping your repayment capacity in mind the bank will decide the amount of your EMI.
• Repayment capacity is calculated on the basis of
  • Monthly income of the borrower, and
  • Surplus income
• However, the factors which calculate your surplus income and monthly disposals include
  • The income of your spouse
  • Monthly expenses
  • Stability of income
  • Liabilities, and
  • Assets

Age of the borrower

• Age is the important factor while planning the EMI.
• It also influences the rate of interest on the loan.
• Younger people get the more chances to receive the loan as they do not have any such responsibilities.
• However, it might become difficult after the age of 30. The borrower may have big responsibilities which can become a drawback at the time of the loan.
• The possibilities of getting a home loan decrease with the increase in age.

Standard of living

• The home loan may affect the way of your living or your lifestyle as it affects your lifestyle choices.
• Because of your living way it is important to decide the EMI so that it won’t affect your lifestyle.

Loan Tenure

• The loan tenure is usually for 15 to 20 years.
• However, in case the borrower wants to finish the loan before the tenure
  • He can pay off the entire amount of the loan with its EMI
  • Such process differs from bank to bank.
  • The borrower must go through the rules of the before paying off the loan altogether.

Rate of Interest

• Throughout the entire loan tenure, the rate of interest of home loan is not going to be the same.
  • EMI will vary every time and there will be a change in the rate of interest also.
• It will increase with time so plan your EMI accordingly.
  • However, while planning the home loan remember the longer your tenure will be the higher will be the interest in future.
• There are two kinds of interest rates for home loan
  • Fixed rate of interest
  • Floating rate of interest
• Fixed rate of interest is usually not preferred

Get best home loan interest rates in India

Other Considerations

• However, the thing which should be considered while planning the loan is
  • Present income
  • Lifestyle
  • Deficit or Surplus income
  • Chances to switch the job
  • Increments
  • Carree choice in future
  • Goals
  • Future expenditure, and
  • Retirement plans
• If the borrower is planning to purchase a car or the other things which may affect the repayment of EMI. The borrower must take a step which will manage the expenditure and repayment of EMI’s. However, it is necessary to make a regular payment in order to gain good credit score.