We all have multiple financial goals. And one important one for most people is to purchase a house of their own. But sadly, houses are extremely costly these days and it requires a lot of money to purchase them.
But house is not the only goal. Isn’t it? Proper education of the children, their marriage, planning for own retirement. All these have to be taken care too.
But sadly, one only has a limited income to invest towards all these goals. Let’s take an example to better understand this.
Suppose you earn Rs 1 lac a month. Now you take a home loan with EMI of Rs 35,000. This leaves you with Rs 65,000 for other needs. Now these other needs include paying for regular household expenses, unexpected expenses, financial goals like retirement savings, children’s education and marriage and what not.
So when you take a home loan, a large part of your income is used up every month to repay the loans. This leaves very less money on table that can be used to save for other goals. And this causes stress to a lot of home loan borrowers.
Naturally, having a large loan affects you ability to save for other goals.
But you can control this to an extent. Taking a loan with longer tenure reduces your EMI. So you have higher surplus left with you. But don’t forget that long loan tenure means higher total interest payments.
So you need find the right balance between the right EMI (that allows you to save for other goals) and the right tenure (that doesn’t force you to pay a large interest cost). And this balance will be different for different people. There is no one-size-fits-all approach here.