Manage your Home loan

PIN Manage your Home loan

Purchasing home these days can haul your years or even decades of savings, hence availing home loans remains the only option for the majority of people.

However, home loans are one of the biggest financial commitments as they have longer tenure as compared to the other loans. The EMI outgo towards a single home loan can drain a major part of your income for a longer period. As a result, you are left with very little room for your savings and investments. Thus, it becomes very important to reduce your home loan burden.

Here are a few tips to reduce your home loan burden:

Increase Repayments with Increase in Income

The simple way to reduce your home loan burden is to repay it fast. This can be done by bumping up the EMI with your increasing income.

Let’s understand this better- Suppose you have a home loan of ₹ 30 lakhs on you for a tenure period of 20 years. Your EMI towards this is ₹ 29,000. Assuming that you get an 8% increment in a financial year. Your increment will increase your income but what is the use if your financial obligations remain the same for long. To reduce your home loan burden – you can increase your EMIs by 5% easily without affecting your budget. Doing this will increase your contribution towards the EMI, resulting in to end up your home loan in a comparatively shorter period. Doing this every time when you get an increment will surely end up your home loan faster.

The other benefit of this is you can save on interest as well.

Opt for Home Loan Balance Transfer 

A longer tenure implies lower EMI and seeing this most of us consider taking a long tenure home loan to reduce the EMI burden. Though tenure is one of the factors which reduces your loan burden, you cannot ignore the fact that when going with a long tenure you end up paying more on the interest. This on the same hand increases the total cost of borrowing.

Apart from all this, the other solution to reduce your home loan burden is- going for a home loan balance transfer.

This is suggested because home loan balance transfer has the potential to decrease your total cost of borrowing.

Suppose you have a home loan with bank X at an interest rate of 8.55%. It has been 4 years and your home loan is ongoing, and you get to know that Y bank is offering a home loan at 8.25% for the same plan. A home loan balance transfer is that facility which allows you to switch your home loan from lender X to lender Y easily. Doing this can save a lot and can reduce your total cost of borrowing. To avail the balance transfer facility you have to check with your lender at the time of availing the loan.

To avail the facility, apply for a home loan balance transfer with a new bank. If your application is approved, your new lender will give you a check with the name of your existing lender for the outstanding amount of your home loan. Submitting this cheque to your existing lender will close your home loan account with them and now you will have your home loan account with a new lender.

Go for a Greater Initial Payment

Given that the RBI permits banks to fund up to 75%-90% of the property’s expenses as home credit, the borrowers need to fund the rest from your own pocket as a down payment.

To reduce the home loan burden, selecting a higher initial installment/down payment is best. This is because a higher initial installment reduces the borrowing amount. And when you borrow less it becomes easy to repay. Making a higher down payment may feel difficult initially, but when you go for it, you have to pay lower EMIs which reduces your financial burden. And on the same hand, it gives you scope for your investments & savings as well.

Repay the Principal Amount First

The faster you repay the principal amount of your home loan, the lesser you have to pay towards the interest. This results in a lower cost of borrowing, thus reducing your home loan burden.

Go for Part Payment 

Got a bonus? Use this additional money to pay down your home loan. Well, it’s not only about bonuses, but it can also be money which you got through your income tax refunds, from maturity of any insurance policies or bonds. The additional money which you get through all this should be used to part pay your home loans. Doing this will end your home loan fast and on the same hand allows you to save some on the interest.

Accuracy in terms of the loan amount is one of the biggest concerns when planning for a home loan. This is because it’s very important to know how much exactly you need. And when you are done with deciding the loan amount, it is equally important to calculate the amount which you need to pay as interest. Doing all this with accuracy is a bit difficult, but you don’t need to worry as- a Home Loan EMI Calculator is the one which can help you to calculate all this.

What is a Home Loan EMI calculator?

As its name suggests, a home loan EMI calculator helps you to calculate how much your home loan will cost along with the payable interest. The calculator even let you know your estimated EMI towards your home loan. Home loans are long tenure loans, and often stretching to decades, and using a Home Loan EMI Calculator helps you to know your financial outflow towards your home loan. This again helps you to plan your budget and decide your affordability.

Remember planning the repayments against your borrowings is an important thing, and the EMI calculator helps you to perform this accurately and effectively. So, before you apply for a big-ticket loan don’t forget to use an EMI calculator.