Everyone dreams of owning a house. To make this dream come true, we take housing loans. Then start the payment of equated monthly instalments(EMI) month after month, for years together. Is it possible to make this less burdensome?

Yes, it is. Bear these points in mind before you opt for a home loan.

Go by need, not eligibility

Your income combined with that of your spouse may make you eligible for a large loan. The amount that you are eligible for is based on your total net income and not what you can save after expenses. Borrow only to the extent you require and can afford to service through your monthly surplus.

Plan for the EMI 

The EMIs will start as soon as the loan is disbursed. Figure out how you will pay the EMIs well in advance. If both you and your spouse are working, decide how the expenses will be distributed among the two of you. You can have a dedicated account from where the EMI will get deducted. Ensure that there is always adequate balance in this account to cover the EMI. Any default in EMI payment can seriously affect your credit rating.

Revisit your budget

A home loan EMI will turn out to be a huge component of your monthly outgo. Take fresh look at your budget. What can you cut down to accommodate the EMI without causing too much strain? How about those long-forgotten subscriptions that you continue to pay for automatically? Can you rein in your impulsive shopping? Stop such leaks and be ready before you start paying the EMI.

Emergency fund

An emergency fund should have about 3 to 6 months of your regular income to meet any unexpected expenses or medical emergencies. Emergency fund will allow you to keep your prepayment plan intact without being derailed by any unforeseen situation.

Plan for pre-payment of the loan

It might sound strange to start planning prepayment just when or even before you have taken the loan. But it makes eminent sense in terms of the huge money you would save in terms of interest. Start accumulating funds for this as soon as you can. Set aside any windfall, like a bonus or a salary hike for the prepayment of the loan. Before you prepay the loan, evaluate the tax benefits, you would be eligible for in case you were to continue with as is.

Invest in mutual funds

As part of your prepayment plan, start investing in a mixed bag of mutual funds. You can plan to accumulate a decent corpus over a few years and then use it to prepay the loan.

Check your home loan statement

The home loan statement will tell you what you are paying the lender.The statement will clearly show the principal component and the interest component separately. Keep an eye on the interest part. That will always be the bigger burden, something you can reduce by prepaying.

Yes, a home loan is often a necessity. But careful planning and consistent saving will spare you the distress and help you service the loan efficiently.