Home loan EMIs can be a nightmare.
While you do have the satisfaction of knowing you will eventually own your home, you also have to grapple with having to spend less money, with fewer treats, with giving up on luxuries that you would otherwise have enjoyed.
We asked Get Ahead readers* to share their EMI stories and advice. Here's what Kannan Venugopal and Manish Singhal said about how to cope with home loan EMIs:
I have taken a home loan from ICICI Bank for Rs 27 lakhs, at a floating rate of 7.5 per cent for a tenure of 18 years. When I took this loan in March 2006, my EMI was Rs 22,815.
However, due to the subsequent increase in floating rates since then, the bank revised my EMI amount and tenure upwards to Rs 26,129 at 11 per cent and 25 years respectively.
This really shocked me since the tenure of the loan now extends well beyond my retirement age of 58 years. At this point, I decided to bring my home loan under control by adopting the following measures:
1. I have increased the EMI from Rs 26,129 to Rs 31,000 so that the tenure doesn't go beyond my retirement age.
2. I have started putting Rs 7,000 in a recurring deposit for one year. Next year onwards, I will prepay Rs 1 lakh towards the home loan. With this, I intend to substantially reduce my 18 year loan tenure.
3. I have decided to sell off my property in my hometown; this property has not given me any return for the last 13 years. I will get around Rs 3 lakhs, which I will use to prepay my home loan and further reduce my liability.
As a result of these measures, I will repay the entire home loan amount (Rs 27 lakhs) within nine years instead of the original tenure of 18 years despite the increase in interest rates. I do hope, however, that the rates have peaked and will not increase further.
However, if you must follow in my footsteps, take care to remember that the entire exercise of planning and prepaying your home loan requires a lot of cost cutting at the home front. You have to reduce spending on expenses like eating out, movies, celebrations like anniversary/ birthday, holidays, gifts etc.
But my family and I have decided this is the only way.
-- Kannal Venugopal
The solution lies in trying to partially prepay your loan every year.
Let's say you save Rs 2,000 every month just for your home loan prepayment. On top of that, maybe, you can put Rs 100 every day in a gullak (piggy bank). At the end of the month, put this amount you have collected in a recurring deposit account.
This way, you can save Rs 36,000 in a year from your recurring deposit and another Rs 24,000 from your savings. By the end of the year, you will be able to prepay Rs 60,000 as partial payment towards your home loan. It would be great if you could do this every year. If you can save more, that is even better.
There are alternate shortcuts like:
~ Selling your existing home and buying a new home at some other location that you think will be cheaper. This way, you may think you can reap the benefits of selling at a higher price and buying at a distant place at a lower price.
~ Paying penalty and changing your home loan account to different banks.
~ Sell the home and go for rental accommodation.
But these may not be good solutions in the long term.
-- Manish Singhal
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Are you facing a similar problem? Have EMIs crippled your life as well? If yes, how are you coping? Are you cutting down on your monthly expenses? Are you borrowing to repay your loan?
What solution have you developed for your home loan problem? Share it with other Get Ahead readers.
We will feature the best and the most imaginative/ practical solutions to home loan woes right here. Make sure you include your FULL NAME, AGE, OCCUPATION, HOME LOAN AMOUNT, THE INTEREST AT WHICH YOU HAVE TAKEN THE LOAN and the CITY you are based in.
Your advice could help others manage their home loan problems. Write in now.
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