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, the borrower must manage his expenses to pay his monthly EMI. The borrower must know how to plan his EMI.
- The loan amount is disbursed by
- Housing Finance Companies (HFC) according to the eligibility of the borrower.
- It is provided to the borrower as and when required by the
- 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 the home loan of the borrower.
- To manage the EMI’s the borrower must manage his expenses
Factors to be considered while planning the EMI
The income of the Borrower
- A good earning or a better source of income is an important factor that decides your home loan monthly installments amount.
- The borrower must make the 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 does not affect his income and expenditure adversely.
- While deciding or figure out the EMI the borrower must consider
- Current expenditure
- Expenditure you have to do in the future which may affect your savings or budget such as
- Family expenses
- Medical expenses
- Personal expenses etc.
- Your EMI should not be affected by the ups and downs of your profession or business.
- Plan your EMI after going through all your expenses.
- The borrower must consider hos repayment capacity to pay EMI on time.
- It is necessary to take EMI seriously otherwise it might put the borrower into trouble.
- Repayment capacity depends on
- 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 based on
- 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
Age of the borrower
- Age is an important factor while planning the EMI.
- It also influences the rate of interest on the loan.
- Younger people get 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.
- 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 a process differs from bank to bank.
- The borrower must go through the rules before paying off the loan altogether.
Rate of Interest
- Throughout the entire loan tenure, the rate of interest of the 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 the future.
- There are two kinds of interest rates for a home loan
- A fixed-rate of interest
- Floating rate of interest
- A fixed-rate of interest is usually not preferred
Get best home loan interest rates in India
- However, the thing which should be considered while planning the loan is
- Present income
- Deficit or Surplus income
- Chances to switch the job
- Carree choice in future
- 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 that will manage the expenditure and repayment of EMI’s. However, it is necessary to make a regular payment to gain a good credit score.