Rules To Follow When Taking A Home Loan

By | August 7, 2017

Taking a Home Loan is a big decision for everyone. Therefore, buying a home requires careful thought and consideration. We can give you a few rules to follow when taking a Home Loan.

The first question you must ask yourself is: How much can you afford?

This is an important question that you need to find the answer to. A Home Loan is a huge commitment over a long term. Look at your income and analyse how much you can realistically afford to repay. Remember, all your loans together should not exceed 50% of your income. A Home Loan should ideally be less than 40% of your monthly income.

Find out your loan-to-income ratio

Calculate your loan-to-income ratio with this formula.

Total EMIs
Loan to Income Ratio =                                                               x 100

Net Monthly Income

Here are a few important tips to remember when you opt for a Home Loan

  • Don’t borrow in excess

Are you familiar with the famous phrase, “Don’t bite off more than you can chew”? Be smart about getting your Home Loan and choose a loan amount that will be easy for you to repay.

  • Choose a short tenure for your Home Loan

Yes, we know the maximum period for Home Loan repayment is 30 years. It can be quite tempting to take a long-term loan because a longer tenure means lower EMIs. Here’s the catch. With a long-term loan, you should be prepared to pay more in interest.

Want to know the EMI and interest breakup of your Home Loan? Try our Home Loan EMI Calculator.

  • If you need to take a longer tenure loan, here’s a handy tip for you

Home buyers, who need a pocket-friendly EMI, should opt for a Home Loan with an extended tenure.

There is one solution for those who are stuck with a long-term Home Loan. Increase the amount of your EMIs. This can have a big impact on the loan period. Let’s explain it more simply.

We’ll consider that your income will see at least an 8-10% increase annually. If you increase your Home Loan EMI accordingly, it should not be too much of a strain on your finances. Remember the higher your EMI amount, the shorter your loan tenure becomes and the less interest you end up paying.

Additional Reading: Common Home Loan Problems Faced By First Time Borrowers

  • Be regular with loan repayments

Financial discipline is important when you are repaying loans or Credit Card balances. You should be careful not to miss an EMI payment or delay your repayments. This can negatively impact your Credit Score.

Don’t know your Credit Score? Click here to check it for free.

Additional Reading: Tips To Improve Your Credit Score

  • Protect your Home Loan with Insurance

In case you’re considering a high-value Home Loan, play it safe and opt for Home Loan Insurance. Alternatively, you could take a Term Life Insurance plan of equal value as your Home Loan. With that under your belt, your loved ones will be secured because your Term Insurance will cover your unpaid Home Loan if anything unfortunate should happen to you.

Additional Reading: All About Home Loan Protection Plans

  • Keep your eyes peeled for better Home Loan rates

Yes. Even after your Home Loan has been sanctioned. Home Loan rates can change. So it helps to keep your eyes open for a better rate on Home Loans. If you do find a loan with a lower interest rate, opt for Home Loan Balance Transfer.

If you are considering transferring your Home Loan to another lender, do so early in the loan period. And don’t forget to check if there are any charges involved.

Additional Reading: What Happens After Your Home Loan Is Approved

  • Have you understood the fine print? 

Don’t brush off the terms and conditions of your Home Loan. Make sure you read through the fine print to clearly understand all the aspects of the loan.

Now that you’re wiser about Home Loans, why don’t you check out some offers? We’ve got paperless loans too – which means faster processing as everything is done online!

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit for the latest rates/offers.

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