Taking a home loan? Five steps to plan your home loan EMIs

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If you do not have existing debt, lenders ask you to pay 40% of your income towards loans. If you sense you will earn a higher salary in the future in the form of hikes, bonuses, incentives, you can continue paying higher EMIs.

If you are already an existing home loan user or applying for one soon, you must be aware that equated monthly installments (EMIs) consume a large portion of your earnings. You have to manage these EMIs well before even signing the agreement. You should ensure the EMIs do not dent your expenses. Therefore, lenders have the home loan EMI calculator at perusal to make your life easier.

Earnings

If you have a stable job in place, the lenders predict you can make your EMI payments on time. Thus, you can have higher EMIs. Initially, it may prove to be a costly affair, but in a few years, it may not seem a burden at all. If you do not have existing debt, lenders ask you to pay 40% of your income towards loans. If you sense you will earn a higher salary in the future in the form of hikes, bonuses, incentives, you can continue paying higher EMIs.

Expenditures

While using the EMI calculator for a housing loan, you must not just focus on current expenses but also on future expenses. Your current and future spending could include family costs, medical fees, kids’ expenses, lifestyle expenses, personal expenses, etc. Your EMIs should also remain unaffected by inflation rates. So, play safely when deciding your EMIs.

The standard of living

Your lifestyle gets affected by EMIs. Every expense needs to be controlled as a large chunk of your income goes towards the EMIs.

Loan tenure

If you can pay a huge chunk as EMIs in shorter tenure, then you have to divert a significant part of your salary towards it. However, if you are not comfortable with it, you can opt for 15 to 20 years of loan duration. If you are comfortable spending a portion of your income for decades, then opt for longer tenures and pay them slowly and steadily. Remember, longer tenure means the lower interest rate and vice versa.

Interest rates

Many prefer floating home loans than fixed ones. The latter is higher while the floating rates change depending on the market conditions and lenders. Thus, your EMI amount varies as the years go by. Therefore, you have to be prepared to shell out higher EMIs for some months.

Courtesy: Financial Express