How to cope with your home loan EMIs

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 Anil Mishra has to say:

I am a 28-year-old, Mumbai-based IT marketing employee who took a home loan of Rs 19 lakhs from ICICI Bank. Here's what I believe you must do to cope with your home loan blues.

You must have a methodological approach to deal with your EMI woes, particularly in the light of rising interest rates.

Theoretically, there are three options for a home loan borrower in this situation:

~ Continue with the increased EMIs for the original tenure.
~ Maintain your current EMI level, but increase the tenure
~ Prepay part of the loan to maintain both the EMI and tenure

If the remaining tenure of your home loan is not too much (five years or less), it makes sense to prepay as much as possible. However, if you still have many more years to go, you need to give a lot more thought to your decision.

That is, you must weigh all the pros and cons. Consider if the interest rates are likely to come down or not. If you think they will in a year or two, then you will be better off not prepaying your home loan. Otherwise, prepay it ASAP.

• Is your home loan burning a hole in your pocket? 

If you want to prepay your loan to reduce your EMI, you will definitely have to liquidate some of your existing investments. In which case, you need to compare the probable returns you would get by staying put with your investments with the benefits of selling them to reduce your EMI.

If the expected returns from your investments are falling below, say eight per cent for 10 years, then it is better to sell them and prepay your home loan. This is because you will be paying more as interest on your home loan EMI than getting returns from your investments.

However, a common man only has two options (because I do not have the funds to prepay my loan): increase EMI or increase tenure.

If you are young, with sufficient years remaining for your retirement, it would make sense to increase the tenure, especially since the interest rates are likely to fall in the future.

Thus, you can still pay the same EMI amount and get benefit of falling interest rates in the future. However, most banks put a cap on the maximum possible tenure.

It is generally up to 20 years, but some banks go up to 25 years as well. So, if you have taken the loan very recently, then the possibility of the bank's approval for tenure increase would not be possible (depending on the number of years remaining before you retire).

In that case, the only option is to take the hit and increase of EMI. As a result, your monthly outgo will increase. Which would mean less of outings or movies or dining out or shopping.

• Is your bank amortising home loan correctly? 

Careful budgeting and fixing the date of your EMI as early in the month as possible will automatically force you to cut down on your spends.

All said, what you decide to do with your increasing EMI  depends on the stage of your life, career and existing investment portfolio.

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, and the CITY you are based in.

Your advice could help others manage their home loan problems. Write in now.