Summary: Home loans are long term liabilities. Hence, people should apply for these loans after proper research and analysis of personal financial conditions.
Taking a loan to own a home has become easier. Enticing advertisements and easy installment plans may be tempting you to avail a loan every now and then. The Indian banking and finance industry supports the aspirations of the Indian youth to own a home before they reach 40. The cumbersome process of taking a home loan in India has been simplified a lot and we no longer have to run from pillar to post to get the loan approved. The eligibility criteria are also rationalized and anyone can plan to avail loan to own a home.
The key question arises whether it is required to take a home loan or not as this financial transaction certainly is a long term liability. After all, the borrower should ensure himself that he does not fall in a debt trap. Here are some subtle sides of the matter that buyers usually ignore amidst the fancies of buying a home, but they can turn critical in nature.
How much should be the loan amount?
As a thumb rule, the Equated Monthly Installment (EMI) on home loan should not exceed by 40 per cent of the applicant's net monthly income. Net income is calculated by deducting insurance premium, income tax, PF contributions, and other obligations towards mutual fund SIP (Systematic Investment Plans) etc., from the gross salary of the loan applicant. Thus, if the monthly income of the applicant is Rs 20,000 and net income comes to Rs 15,000, his monthly home loan installment should not exceed Rs 6,000 (40% of Rs 15,000). The rest amount is utilised for routine expenditure.
Proper future Planning
A large number of people assume a hike in their incomes for future and make decisions based upon estimations. Its good to be positive but counting chickens before they hatch may be disastrous.
People should remember that the home loan is a long term liability, usually between 10-20 years. In this period, their income may rise. But, with the increase in income, liabilities and expenses also increase. Hence, home loans applicants are advised to think properly before they opt for the loan.
|
