How to Plan your Home Loan Installment

How to Plan your Home Loan Installment
Spending a life where there will be no interference of landlord is a dream of every tenant.
This common dream of many has come true with the aid of home loans. Home loan is
designed such a way that owning a home become possible for people of every economic
status. A home loan can be as little as 6 lakhs or it can be as high as 1 crore or more. The
feature of home loan which makes it affordable for everyone is the repayment process of
the home loan. The repayment of a home loan is done through easy installments which are
commonly known as EMIs. The EMI (equated monthly installment) are the equal division
of the total outgo of the loan. The EMI of any loan depends on many factors such as
a) Rate of interest
b) Loan tenure
c) Principal amount
d) Monthly/annual resting period
When any kind of loan is applied, the applicant gets a chance to choose the EMI amount.
One must plan it considering the present economic condition and foreseeing the upcoming
days. When we start paying home loan installment every month, we need to redefine our
monthly budget. A big share of our monthly take-home income is paid in installments.

Understanding the depth of the matter- here we have come with some tips to help you
decide your installment amount.
Earnings: The earning is the primary factor to decide the EMI amount. The financial
expert's advice that the total payables of a person should not be more than 50% of the total
take-home income. When EMI of a person crosses more than half of his monthly income he
reaches in an alarming financial condition. But the other experts opine that if the borrower
has a stable job in a stable industry he can go for even higher EMI. The initial stages may
be difficult to come across but along with the passing when the income will be increased,
the EMI amount will seem to be small.
Expenditures: The expenditure of every family is different. There is no standard
measurement scale where we can determine if a family is spending more or less. The
expenditure of a nuclear family and the expenditure of a joint family will always have a
great difference. While deciding EMI amount one must keep the expenditure of his family
in consideration so that because of paying a higher EMI the members of the family has not
to compromise in necessities.
Age: Age is one of the most important factors which plays an important role in deciding the
EMI amount. If a person purchases a home at an early age, he will be able to bear a large
EMI. With increasing age, the responsibilities of a person increase. After a certain age, one
has to take the responsibility of his parents, spouse, kids etc. So with increasing
responsibility, the expenditure also increases. So if a person buys a home at his 30's he may
not be able to go for a high EMI which was possible at his 20's. Moreover buying a home at
an early age with a high EMI is always appreciated as makes a person debt-free sooner.
Loan Tenure:- The loan tenure also can bring changes to the EMI amount. There are
people of different mentality. Some people don't like to live on a tight budget where some
others like to become debt free as soon as possible. According to one's desired lifestyle one
can choose for a longer tenure with small EMI amount or a shorter tenure with a huge EMI.
The installment amount depends on the length of the tenure. With a short tenure one can
have a small installment amount and vice versa.
Home Loan Interest Rate: One has to take care of interest rate too while deciding the EMI
amount. Most of the home loans nowadays are MCLR linked or on floating interest rate.
Unlike fixed interest rate, the floating interest rate can increase or decrease during the
tenure. One has to be prepared for this while fixing the EMI amount. In the case of
increasing interest rate, the EMI is certain to increase. One must have to be able to bear the
increased EMI without a fail.
Owning a home at the right time, with the right amount of EMI is very important so that
you don't need to regret in later part of life. A home is always sooner is better as you can
pay more in EMI. Getting more liabilities is a common phenomenon, but if one can own his
home before that stage it will be called a True Achievement.