Are Home Loans The Best Funding Option?
Most potential borrowers weigh this question from time to time. If you want a simple answer, it’s both – a yes and a no. The answer hardly looks simple; however, you must understand that a home loan is a financial product that has several components, which can affect your funds. How much is the interest rate? Is it floating or fixed interest rate? What type of repayment option have you selected? What is your credit score? Are your EMIs lesser than 30% of your family income?
Most of these questions are simple while their answers are not. You might want to opt for a housing loan at a fixed interest rate. However, are you aware that housing finance companies can change the fixed rates over a period of time? You might get a housing loan with reasonable EMIs. Yet, to enjoy a healthy financial life, you must ensure that the EMIs make up for less than 30% of your income for the next 20 to 30 years. Hence, as a product, it is the best funding option. Nonetheless, you would need a vigilant eye on your monthly cash flow to ensure that the EMI doesn’t affect your lifestyle and major life choices.
You must see this financial product holistically to make an opinion. Most Indian borrowers can easily save up to 30% of their income. So, if you can maintain the EMIs of your housing loan lower than that at all times, then you can lead a stress-free life. Since majority of the people are in their late twenties or thirties when they opt for home loans, it is easier to pay off the EMIs along with the increasing costs including kids, school fees, medical bills, etc.
If you have chosen a customized repayment scheme, then you must be able to keep up with that. Most professionals and business owners opt for accelerated repayment scheme, which allows them to increase their EMIs with a gradual growth in their income. Salaried employees, who have taken their housing finance at a floating interest rate, may find it difficult to pay the EMIs if the interest rates increase without a concurrent increase in their salary.
Thus, potential borrowers should not opt for a home loan in a rush. With a little patience and perseverance, you can find the housing finance that works best for you. Agreeably, it means that you should pay for the process with several lenders and that is a costly choice. However, since it is a long term financial agreement, you must enter it with caution. This funding option thus comes with customization for a reason. Use it well and you would be a proud home owner soon.
