Avoid this mistake when determining your home loan EMI; otherwise, your entire budget could be disrupted..
Buying a home is a dream for almost everyone today; however, people often take out home loans that exceed their financial capacity in order to realize this dream. While this decision might seem right initially, the burden of paying a hefty EMI (Equated Monthly Installment) later on can lead to financial distress.
Experts advise that your home loan EMI should not exceed 25% to 30% of your monthly income. If the EMI goes beyond this limit, it can become difficult for you to save, invest, and meet future financial needs.
What should the EMI amount be?
Suppose your monthly income is ₹1 lakh. In this case, your EMI should be around ₹25,000; it can go up to a maximum of ₹30,000. If the EMI exceeds this, your monthly budget could be disrupted. Similarly, if your monthly income is ₹75,000, it is advisable to keep the EMI around ₹18,750, with a maximum limit of ₹22,500 considered acceptable. If your income is ₹50,000 per month, keeping the EMI close to ₹12,500 is appropriate, though it can be stretched to a maximum of ₹15,000 if necessary.
Insufficient funds for expenses
Experts note that when taking a home loan, many people focus solely on the maximum loan amount the bank is willing to offer, without considering how much EMI they can comfortably pay each month. This oversight often leads to financial stress later on. If a large portion of your income goes towards EMI payments, you will not have enough money left for savings, investments, medical emergencies, children's education, retirement planning, and other essential expenses.
Consider these expenses as well
Furthermore, when buying a home, people often focus exclusively on the EMI, overlooking the fact that there are several other associated costs. These include expenses such as registration fees, stamp duty, property tax, maintenance charges, home insurance, and costs for furniture and interiors. Therefore, it is essential to account for all these expenses before buying a home.
How can you reduce the EMI burden?
Make a larger down payment when purchasing the home.
Choose a home based on your specific needs and income.
If necessary, you can extend the loan tenure to lower the EMI.
Consult a financial advisor before taking out a home loan.
Remember, buying a home is a major life decision. Choose a home loan with an EMI that you can comfortably repay over the long term without stress. A well-planned home loan provides financial security, whereas an excessively high EMI can limit your financial freedom.
Disclaimer: This content has been sourced and edited from News18 Hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
