In today’s times, having a home of your own is crucial and banks have made it extremely ease to buy one with the help of a home loan. While the concept of a housing loan is not new to anyone, it definitely is a huge step and needs proper financial planning and repayment planning so that the borrower can pay off the loan on time and without incurring penalties.
A little financial planning and budgeting can help you keep the financial pressure and mental stress of home loan repayment at bay. Check out some of these tried and tested tips that can help you manage your housing loan at ease and even work towards paying off the loan before the stipulated tenure.
Plan your finances in advance
Opting for a housing loan is one of the biggest decisions that an individual takes and it is a huge sum to pay off over the years. In order to meet this commitment in the years to come, it is vital for the borrower to have a budget in place.
- Valuate your current assets and investments
- Know how many short term expenses you have on a monthly basis
- Plan for the long-term expenses by saving or investing money routinely
- Keep a track of your ad hoc expenses and try to stay within the planned budget
If you have planned for your finances in advance, and made room for investing or saving a part of your income routinely, then it greatly reduces the burden of home loan.
Opt for a higher EMI amount
One of the best ways to lower your home loan interest rate and pay off your loan faster is by option for a higher monthly EMI amount, which will mean shorter tenure and lesser interest paid on the overall loan. However, ensure that the EMI amount you select is easy for you to pay off on a monthly basis. Using a home loan calculator, you can calculate how much interest can be saved on the EMI amount of your choice.
The home loan interest rate of different banks keeps fluctuating and is flexible in nature. Hence, it would make sense to shift your home loan from your current bank to one that is offering a lesser interest rate or a more flexible payment tenure at present. Remember to calculate the internal rate of return (IRR) that you will be charged for transferring the housing loan as well.
Save more to prepay home loan
While you are already paying your housing loan back to the bank or lending institution, through monthly EMIs, there is also a facility to pay an additional amount from time to time. Most banks allow this for every lender once they complete certain months of EMI repayment. You can easily use your bonus or incentive amount for a one-time top-up payment for your home loan.
You can also plan and save some of your earnings every month to pay a lump sum amount against your home loan principal amount. This will reduce your monthly EMI amount and help you pay off your housing loan faster.
Opting for a housing loan is a crucial decision, and it is important to evaluate your finances, plan your budget and have a loan repayment plan in place. If you have made provisions for your expenses in advance then repaying a home loan is not stressful or burdensome in the least.