Owning a home is a dream to many, and home loans are the financial tool that helps one to live their dreams. But in a rush and excitement to buy a new house, many end up making mistakes. These mistakes include selecting a wrong lender, an inappropriate plan, or agreeing to some terms and conditions which are not suitable. All this can cause a lot of stress and financial pressure in the future if not corrected on time.
So, let’s know a few points to make your home loan borrowing more joyful. Following which will also help you to manage your home loan like a pro.
Manage your Finances
Paying a home loan is a big commitment, and you need to manage your finances well to achieve it. Doing this needs money management skills & a bit of financial awareness. You can’t spend all your money and later blame it on the situation.
- Make a budget
- Stick to it every month
- Have investment plans
- Try to save more
- Wait for offers and discounts
- Track your spending
If you have invested somewhere that makes you pay unnecessary without profit, you need to close all those investments and focus on prepaying your Home Loan first.
Increase your EMIs
Higher EMIs may look scary, but they help you to end your loan faster. Another important thing which you may not be aware of it – while paying low EMIs, you are actually paying more at the end of the tenure. To be accurate, and have proper plans you need to use the Home Loan EMI calculator. Doing this will help you know your EMIs in advance and will also tell you how much you will be paying at the end of the tenure. So accordingly you can plan your finances and EMIs as well.
There is no benefit in paying low EMIs when you can pay more on EMIs and save on interest.
Pre-payment & part payments
Though home loans are available at a lower rate of interest still it ends up consuming approximately double of what you borrowed. So, it’s always better to end your loan as fast as you can. To do this, you need to make partial or pre-payments whenever you have sufficient funds.
Instead of following the usual EMI process paying lump-sum amounts when you get a bonus or incentives will help you.
You can also do with when any of your investments such as fixed deposits, RD matures. Doing this will either help you to reduce your EMI or your loan tenure? And in both cases, you will be saving on interest.
Balance Transfer/ Refinancing
Balance transfer of a home loan basically means transferring the outstanding loan amount of an existing loan from one lender to another lender to get a lower interest rate, better terms, or flexible tenure option.
And is a viable tool to reduce the EMI burden. The tenure of the home loan is high and thus, if the borrower comes across any lender who is offering the loan at a considerably low rate of interest, then the borrower can for sure reduce their EMI burden to a greater extent when going for a balance transfer.
But before one goes for a balance transfer, they should calculate the internal rate of return (IRR) from the transfer as well. However, if the outstanding amount is too less, then it is not advisable for the person to opt for the home loan balance transfer. This is because there is a possibility that a person may end up paying a similar or even higher amount compared to the current lender.
Though, there are lots of housing finance companies and lenders ready to approve your loan. But, once you get approved for it, it becomes your responsibility to manage it properly. However, finding suitable deals and lenders solves most of your problems. Remember, a careful and appropriate decision can lead to getting advantageous fruits for you in the future.