Monday, 17 October 2011
What bankers do not discuss in your Home Loan ?
we discuss on the softer side of the matter that is usually ignored amidst the fancies of buying home loan, but turn critical in nature.
How much?
As a thumb rule, your Equated Monthly Installment (EMI) on home loan should not exceed by 40 per cent of your net monthly income. Net income is meant by the disposable income left after all statutory deductions like insurance premium, income tax, PF contributions, and other obligations towards mutual fund SIP (Systematic Investment Plans) etc.
Thus if your monthly income is Rs 20,000 and net income comes to Rs 15,000, your monthly home loan installment should not exceed Rs 6,000 (40% of Rs 15,000). The rest is assumed towards your routine expenditure.
Our suggestion
Though 40% is a standard, we advise you to keep it below 25% of your present net income. Reason- you should have reserves to meet some unforeseen situations. It may be healthcare or financial affairs or any unexpected expenses under the sun.
Future Planning
A large number of people project hike in their incomes for future and make decisions based upon estimations. It’s good to be positive.
But you may enter into troubled waters in case things move in opposite direction.
Also, the home loan is a long term liability, usually between 10-20 years. In this period, your income may keep on rising but so do your liabilities and expenses. What should you do then?
Our suggestion
Suppose you expect your present monthly income of Rs 20,000 to Rs 30,000 a year after, you plan your EMI as per present income only.
Later when your projections turn into reality, you can either re-work your EMI with your bank or invest the additions into other prolific investment options.
This way you can balance your liabilities and at the same time remain stress-free on spiraling burden of EMI, which could form in case of failing estimations.
Final words
We hope that the above discussions will prove beneficial to you and help you work out a well planned home loan transaction, safe and happy.
We’ll continue bringing such information and insights on home loans for you, on regular basis. So be in touch.
As a thumb rule, your Equated Monthly Installment (EMI) on home loan should not exceed by 40 per cent of your net monthly income. Net income is meant by the disposable income left after all statutory deductions like insurance premium, income tax, PF contributions, and other obligations towards mutual fund SIP (Systematic Investment Plans) etc.
Thus if your monthly income is Rs 20,000 and net income comes to Rs 15,000, your monthly home loan installment should not exceed Rs 6,000 (40% of Rs 15,000). The rest is assumed towards your routine expenditure.
Our suggestion
Though 40% is a standard, we advise you to keep it below 25% of your present net income. Reason- you should have reserves to meet some unforeseen situations. It may be healthcare or financial affairs or any unexpected expenses under the sun.
Future Planning
A large number of people project hike in their incomes for future and make decisions based upon estimations. It’s good to be positive.
But you may enter into troubled waters in case things move in opposite direction.
Also, the home loan is a long term liability, usually between 10-20 years. In this period, your income may keep on rising but so do your liabilities and expenses. What should you do then?
Our suggestion
Suppose you expect your present monthly income of Rs 20,000 to Rs 30,000 a year after, you plan your EMI as per present income only.
Later when your projections turn into reality, you can either re-work your EMI with your bank or invest the additions into other prolific investment options.
This way you can balance your liabilities and at the same time remain stress-free on spiraling burden of EMI, which could form in case of failing estimations.
Final words
We hope that the above discussions will prove beneficial to you and help you work out a well planned home loan transaction, safe and happy.
We’ll continue bringing such information and insights on home loans for you, on regular basis. So be in touch.
