Your home loan EMIs are not entirely immune to extraneous factors in case you thought so! They can be influenced by several aspects as per experts. Of course, most of us require home loans to purchase property as future assets and security for your families. In this context, it is important to mention that EMIs may fluctuate depending on several factors.
Factors influencing your home loan EMIs
- Home loan interest rate fluctuations- Interest rates may fluctuate in the current scenario, particularly if you have a home loan which is tied to a floating rate of interest. This will influence your home loan EMI since interest rates keep changing periodically and this will naturally lead to your EMI amounts changing. Your EMI may go up or down depending on the changes in interest rates. There are reset periods for MCLR linked home loans post which the rate of interest changes and so does the home loan EMI.
- Changes in Tenor- The home loan tenor is what directly affects the home loan EMI. The longer the tenor, the lower is the EMI and vice versa. The higher your EMI, the shorter your tenor likewise. You should never forget that a longer tenor leads to a higher interest outgo on your home loan over a period of time. In case you earn a higher sum of money on a monthly basis, you can lower the tenor and will be increasing your EMIs to lower your interest costs and get the home loan done with quicker.
- Home loan prepayments- Prepaying home loans will naturally influence your home loan EMI. This lowers the principal amount and this will lower the interest payable on the home loan. This will influence your loan EMI directly. Lenders may have a prepayment penalty that you will have to fork out. Yet, floating interest linked home loans do not come with prepayment charges.
- Home Loan Balance Transfer- Transferring your home loan to another lender will naturally impact your home loan EMI. You can always switch your home loan to another lender if you get considerably lower rates of interest. Your home loan EMIs may come down as a result. Yet, before choosing a balance transfer, you should do an analysis of the costs and benefits. The savings that you will get should be higher than the overall cost in terms of fees, charges and so on. A home loan balance transfer is always helpful whenever you get this done in the early years when you’re paying a higher interest component.
- Step-Up or Step-Down EMI repayment plans- Whenever you apply for a home loan, there are several innovative options that you can take into consideration. You can choose step-up or step-down repayment plans for home loans. In case of the former, the EMIs will increase proportionately with your increasing monthly income. In case of the latter, the EMIs will come down proportionately in relation to your age or your decreasing income, whichever be the case. In the step-up framework, you pay lower EMIs initially and then they increase while in the step-down format, you pay higher EMIs initially and then they reduce.
These are some of the factors that directly affect your home loan EMIs, making them go up or down depending on the circumstances. However, you should always take your decision carefully based on your repayment abilities and also by comparing the loan products that are available in the market. You should always use a home loan EMI calculator for working out the home loan amount payable every month as EMI before applying.
You should work out a budget for your home loan repayments which should include all the added costs which come with buying the property. Additionally, make sure you arrange for the down payment amount and the higher this is, the better off you will be since you will have to pay lower interest overall.