When applying for a Housing Loan, you need to repay the principal and interest amount through equated monthly instalments over the tenure. You need to plan your expenditures towards personal needs and Loan repayments. You should know how much EMI you can afford and within how many months.

A standard answer is 35% to 40% of the net take-home salary. For Home Loan EMI repayments, you need to factor in your salary level, house cost, interest rate, and other factors. If you earn Rs. 80,000 monthly, your monthly expenses are Rs. 45,000 per month, the EMI can be at most Rs. 35,000 per month. You cannot pay an EMI beyond 44% of your salary.

On the other hand, if you earn Rs. 3 lakh per month and your monthly expenses are Rs. 80,000 per month, you should not pay an EMI higher than Rs. 2.2 lakh per month, that is, 73% of salary. As your income increases, you can afford to pay a higher EMI.

How to manage the expenses?

Your life is not just about buying a house. There are other retirement goals, too, such as retirement, kids’ education, weddings, parental care, contingency plans, travel, etc. You cannot put all your funds towards Loan repayment. You can follow a few approaches to managing your expenses and reduce the debt:

Focus on your career

You may reach a stage where the numbers fall in place, and you will be able to pay Loan EMIs and invest for the remaining financial goals. This is the most practical way forward. You should be open to opportunities to improve your skills, career, and income.

Start planning finances early

Borrowers buy a house and aggressively prepay the Home Loan over the next few years. They start planning and investing for other financial goals as it becomes more manageable. Alternatively, you may start with financial investments early on in your career. You can consider buying a house as your income and savings grow and cashflows improve.

Wait until high-priority goals are accomplished

Wait until the investment for high-priority goals such as kids’ education is over. Once you have accumulated sufficient money, you can consider buying a house. However, if you delay, you may get a Loan for a shorter tenure. A shorter tenure means a bigger EMI. You can make it manageable by using a Home Loan EMI calculator.

Buy an affordable house

You may not be able to buy a house worth Rs. 1 crore but may have the resources to buy one worth Rs. 50 lakh. While other financial goals get accomplished over the years, you can sell this property and fund the purchase of your dream house. This way, you can plan your finances and fulfil other priorities seamlessly.

You need to plan your expenses and investments wisely before committing to Home Loan EMI repayments. Follow this guide for better clarity.