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
    • 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 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.

Expenditure

  • 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.

Repayment Capacity

  • 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
    • 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 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
    • Assets

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.

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 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

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 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.