Home Loan: How Much Should You Borrow?

You might want to build your dream loan like so many others. But you might get stuck in the process of taking a home loan to finance it.

You get confused about how much home loan to borrow. You might think it depends on your eligibility and the cost of the property. Well, there are several other factors you must consider while applying for one.

Let us take a quick look at them.

1-) Consider Your Monthly Income

Your lender will check your monthly income to determine your eligibility. They would want to make sure you can afford to repay the loan.

Most lenders will want to ensure that your EMI is not more than 40 to 45% of your monthly income. For instance, if you earn Rs 50,000 per month, your maximum EMI will be around Rs 20,000.

However, always remember that your lender will offer the highest amount available according to your eligibility. So, you have to decide whether you can afford the EMIs every month. Don’t borrow a hefty amount that will put pressure on your finances.

2-) Take Your Monthly Expenses into Account

You may earn Rs 1 lakh per month. But, what if your monthly expenses amount to Rs 75,000 per month. Well, even if the bank thinks you will be able to pay an EMI of Rs 45,000, it might not be feasible for you.

So, always check your expenses before taking a home loan. Make sure you can comfortably pay the EMI amount after meeting all your necessary expenses. After all, defaulting on the loan payment might lead to the seizure of your property.

3-) Don’t Go A Bigger House If You Don’t Need

A home is for sheltering you and your family. A bigger home will only mean more expenses. Moreover, you will also have to take a higher loan amount for it. Go for a bigger and expensive house only if you need it and can afford it.

4-) Consider Any Sudden Decrease in Income in The Future

You might be earning enough to pay the EMI now. But your income might fall due to unexpected circumstances in the future. So, you need to make allowances for that.

Moreover, your income will also reduce after retirement. So, make sure you borrow an amount that gets repaid before you retire. Borrowing an exorbitant sum will put unnecessary pressure on your finances post-retirement.

5-) Use A Home Loan Calculator

A home loan calculator will help you know your EMI amount. Just enter the loan amount and tenure. You will get to see the monthly instalment you need to pay.

Knowing your EMI will let you decide on how much you can afford to borrow. You can avail the benefits of an EMI calculator on your lender’s website. It is also super easy to use.

The Bottom Line

Your house building loan can fulfill your dreams. However, if you do not borrow the right amount, it can mess up with your finances. Follow this guide  to decide how much to borrow.

 

Leave a Reply

Your email address will not be published. Required fields are marked *