A home loan is a big responsibility. That’s why it is often advised to be mentally and financially prepared for it before applying. Because not only does a home loan put you in charge of your own property, but it also becomes a resident in your monthly finances. Thus, home loans take a lot of financial planning – before applying as well as after getting it sanctioned.
While a lot of people seem to plan for the part that comes before applying for a home loan, most people fumble to pay their monthly home loan EMIs and manage their finances after getting a home loan sanctioned. Such circumstances can be tough. To help you stay away from such a scenario, we’ve got you eight tips to manage your finances with a home loan.
1. Be friends with numbers
Most of us hate to sit down with a calculator and crunch numbers. However, with a commitment as big as a home loan that spans in tens of lakhs or over a crore, anyone with a home loan must learn to be friendly with monthly budget numbers. Irrespective of how anxious it makes you, numbers are the only ones that can help keep your monthly boat stay afloat. So, sit with your monthly numbers at least once every month.
2. Work backward to your home loan EMI
Often, people create their monthly budgets by placing bills first. However, your home loan EMI is the biggest bill that you will be paying for your dream house. So, when crafting your budget, consider your available monthly funds as the amount that is derived after subtracting your loan EMI. Instead of looking at your EMI as a bill, look at it like one of the cut-offs you have on your payslip. And then create your monthly budget.
3. Know your home loan policies like the lyrics of a song
By signing your home loan agreement, you have committed to every term and condition outlined by your lender. This includes regular monthly repayment of your home loan and the fines that come with when you fail to do so. Know what provisions and restrictions you have outlined in your home loan agreement and use them to plan your monthly, quarterly, and yearly budgets.
4. Be young and pre
If you’re in your 20s or early 30s and have taken a home loan, try to make as many prepayments as you can on your home loan. This will help you relax into the later stage of your life when your responsibilities increase.
5. Be wise and know your EMI size
When looking for a home, people often stretch their budget as well the amount they borrow. As a result, most of their salaries go into paying EMIs. However, according to experts, your home loan EMI should not be more than 40% of your bet take away salary. So, make sure your EMIs are not more than the stipulated 40%, and the remaining goes towards your monthly expenses. If you are paying more than 40% of your salary as EMIs, try consulting a financial advisor to help you manage better or your home loan officer to renegotiate your home loan terms.
6. One commitment is not enough
While a home loan is certainly the biggest, it is not the only financial burden you may have. From children’s’ education to health insurance premiums, you will have other smaller essential payments to make every month too. So, make sure that you have planned your monthly budget in a manner that these tinier commitments do not affect your home loan EMIs payments. As per economic experts, premiums like a home or health insurance should not exceed 8% of your monthly income.
7. Style your life as per your EMI
As mentioned above, given 40% of your pay is going to go towards your home loan, which leaves you with 60% of your salary to pay your bills, make your investments and manage your household. Therefore, make sure that you curtail your lifestyle within these boundaries because your EMIs and your investments towards you or your children’s future are more crucial than upholding a fancy lifestyle.
8. Let a back-up have your back
There’s no denying that the future is unpredictable. This trickles down to you being able to pay your monthly home loan EMIs. That’s because no one, not even lenders or employees, can guarantee job security or grant employment guarantee. For such times, you need to have a contingency plan in place so you will still be able to pay your home loan. Have an emergency fund in place, so you have back up in case of unmitigated financial hardship.
With these tips, you will be able to navigate your monthly expenses with a home loan. And if you’re someone who hasn’t yet applied for a home loan but plans to in the near future, head to ApnaPaisa.com to get everything you need to know about home loans and more.