Home loans are a great option to give wings to your cherished dreams. The dream to have a lavish new house is in the mind of every citizen but due to the other burdens of the family people often make it true. On the other hand, a Home loan is a long tenure loan that needs your commitment for a longer period of time. The maximum tenure of the Home loan is 30 years which means you need to the EMIs for 30 years and it is really very challenging to handle the unanticipated overheads. This article will help you to follow some smart tips to manage your Home loan.
Smart Tips to Manage Your Home Loan
Following are the tips to manage your Home Loan:
- Manage your Finance First: The first and foremost objective at the time of dealing with loan and investment is to manage your finances and somehow maximize your cash flows. Making the monthly budget and sticking to it throughout the month can be helpful to the most extent. It will ultimately keep the track of your income and expenditures. Count your monthly payments that are the outflow of your funds along with the monthly return on your investments.
- Pay Larger EMIs: At a young age, you have lesser responsibility. It can be a wise decision if you buy a house at a young age as you have no monetary issues. Your life is smooth and you can pay larger EMI towards your home loan. The burden will be reduced as the loan will end in a shorter time as compared to the normal tenure. This way can save your interest too. If your money stream is flowing freely then despite spending on luxuries and enjoyments you can increase your EMI.
- Pay a Bigger Down Payment: When you have sufficient savings in your account or investment from which you are not getting something in return then this is the perfect time to use them. Only you need to pay some amount from your pocket that is known as the down payment. The amount of down payment is usually 20% to 30% of the total cost of your home. If you can arrange more then it would be better to pay more on down payments. This will reduce the burden of monthly EMI as you have initially paid a bigger amount. Further, this can reduce your tenure in both cases whether it be low EMI or low tenure. Anyone can save your money and is good for your pocket as it reduces your burden. It enables you to repay your loan faster without paying too much in form of interest.
- Transfer Balance for Lower Interest Rates: One of the tips to manage your Home Loan is to lower the interest rate many times due to diversified interest rate reset periods. You may opt for a home loan with high interest and later you found that lenders are offering the same loan at a lower interest rate. More can be saved by choosing the banks that have lower interest rates. Through this, you can also achieve “A Balance Transfer Schemes” of banks. According to balance transfer, the outstanding principal amount of the home loan amount is transferred to another bank which is done for lowering the rate. Before going for it, you must ensure that you do not make the switch for minor interest rate change as some banks charge penalties on the switch. So, you have to be sure that while going for it, you are saving much more than the penalties. For it, you have to undergo the loan appraisal and underwriting processes again along with the paperwork.
- Go for Partial Prepayment: Longer the time to repay the loan amount, the more interest will be charged. Prepayment partially is a speedy way to lower the loan tenure and reduce the loan obligation. There are certain advantages of partial prepayment. Most of the banks do not charge any fee for the facility and the amount of prepayment can be as low as Rs. 10000. A burly bonus, big gains on stocks and shares, income from property sold, any tax-saving investments or fixed deposits that are maturing, gifts from parents or family, rental income and many more such one-time incomes can be used for the partial prepayment.
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