Firstly you should plan before going any home loan, whether it is too high. If your problem is one where the EMI is too high, due to either an increase in overall interest rates, or an increase in your personal commitments to yourself, your loved ones, or any other matter personal to you that reduces your bank balance, or a combination of these factors and others, then what the bank will do is restructure your loan.
Almost all house purchases today are funded by a NBFC’s and banks. This means payment of heavy amount as down payment as well as monthly payment in the form of Equated Monthly Installments (EMI). The amount you pay as an EMI every month depends on the loan amount you borrow, which again depends on the down payment you made for your house.
Nowadays, more and more borrowers are families where both the husband and wife are working. As a result, loan eligibility is more, and people think they can afford to borrow more simply because they are eligible to do so. However, remember that banks grant you loan based on the net take home pay, and not based on what you save. Hence you must borrow only to the extent you can comfortably repay. This means, to buy the house of the same value, you should increase the amount you pay as the down payment. Wait till you can save to pay a considerable amount as down payment, so that your borrowing is reduced. If you still feel that this is a stretch, settle for a house with a lower budget.
1. Plan for prepayment if your salary increases
Increase your contribution to yearly prepayment corpus (discussed in point 1) if your income increases. If you receive a raise each year, it would be sensible enough to divert your funds towards this goal unless you require the money elsewhere.
2. Analyzing your salary other than on the EMI
Look at areas where you can cut back expenses, especially on the discretionary areas. For instance, if you find out that expenses on eating out comes to Rs.5000 per month, look at how you can reduce this – either by reducing the number of outings or cooking attractive options at home which will consume much less money.
3. Look to invest in mutual funds
If you have any excess savings during the month, invest in good quality mutual funds, which will give