Purchasing your dream home is a major milestone, and choosing the borrowing amount is an essential part of the planning process. Choosing a home loan helps finance buying a house or constructing one, where borrowers repay the sum in EMIs over the extended tenure. But it may not always be suitable for every applicant to choose the maximum available amount.
On the basis of income, existing financial commitments, upcoming expenses and repayment capacity are some of the factors the right borrowing amount should be based on. Borrowers can manage their monthly budget with careful planning of EMI while they work towards homeownership.
How Should You Decide Your Home Loan Amount?
Here are some of the factors that you should consider when applying for a home loan:
- Your monthly income after making all the regular deductions.
- Existing financial obligations, including EMIs, credit card payments and regular financial payments.
- Essential household expenses, including rent, education, insurance, and utility bills.
- A larger down payment can reduce the borrowed amount.
- Upcoming planned expenses like children’s education or retirement plans.
- Avoid using your savings to purchase a property.
Why Is EMI Affordability Important?
An EMI for a home loan is a debt that continues for years, and since a higher loan repayment can reduce the tenure, it also puts pressure on your monthly cash flow.
Make sure you consider how comfortably you can make the repayment and still manage regular financial goals. If you face any unexpected expenses, an affordable EMI ensures to provide greater flexibility.
It’s also helpful to account for possible changes in income or expenses during the loan term. Leaving some flexibility in your monthly budget can make repayments easier to manage.
How Does Loan Tenure Affect EMI Planning?
Loan repayment tenure directly impacts the EMI and your overall interest payable. Choosing a longer tenure reduces the monthly EMI but increases the interest outgo of the home loan, and a shorter tenure increases the EMI but decreases the interest amount.
So, it is always advised to borrowers that they must choose a tenure that is based on their income stability, financial goals, and repayment capacity, rather than choosing the longest tenure possible.
Should You Borrow the Maximum Eligible Amount?
It is not generally recommended that borrowers choose the maximum eligible amount for a home loan, as it can strain your monthly budget. Here’s why avoiding the maximum loan limit should be a great idea:
- You can face a large EMI burden as the sum takes a major share of your income.
- Larger loan amounts lead to an increase in the total interest amount payable.
- Managing your budget becomes difficult during financial emergencies.
- Eliminates the scope to invest or save for other upcoming goals.
How Can You Make Home Loan EMI Planning Easier?
Follow these steps to make your EMI for home loan planning much easier:
- Calculate EMIs using an online calculator and choose the right tenure and loan amount.
- Compare the different loan offers by different lenders to choose a reliable one.
- Don’t forget to consider your existing financial debt to know the available income for EMI payment.
- Account for registration, taxes, interiors, maintenance and other home-buying expenses.
- Maintain an adequate savings account for emergencies.
- Avoid basing borrowing decisions solely on expected salary increases or uncertain future earnings.
Conclusion
More than just finding the loan amount a lender is willing to offer, choosing the right home loan amount is about deciding how much you want to borrow. As a borrower, make sure you consider your income, monthly expenses, existing debt, savings, and upcoming financial goals.
Bajaj Finserv offers a convenient application process for home loan applicants, with quick approvals and low interest rates, subject to eligibility and applicable terms. Its home loans provide financing of up to ₹15 crore, with tenure options of up to 32 years. Eligible borrowers with floating-rate loans can benefit from no foreclosure fee. Bajaj Finserv also has 5,000+ approved projects, subject to applicable conditions.
