If you are looking to purchase your dream property but falling short on funds, applying for home finance is a practical solution. However, home loans are long-term financial commitments with regular EMI burdens. Despite its numerous benefits, due to long repayment tenures, they can take a toll on your future finances.
Don’t worry, as there are many ways to avoid these financial burdens if you plan smartly. Take a look at these tips to ensure a stress-free loan repayment experience.
Prepaying the loan
The overall interest primarily depends on the home loan interest rates and the principal loan amount. If you avail of long-term financing at a higher interest rate, the total repayment cost can almost double the capital you borrowed.
To decrease this burden, you can prepay a portion of the loan. If you have sufficient funds in hand, use it to prepay at least 5-10% of your principal amount. This will clear off a significant part of your debt, especially if the interest rates fall.
Going for extended loan tenure
A longer loan tenure usually comes with lower EMIs. As such, many consider extending their lending duration to reduce the repayment burden. This is especially beneficial if you expect a salary hike soon. Aligning with your increasing income, you can eventually make bigger EMI payments and pay off your loan early.
Opting for a balance transfer
You can also transfer your financing to another lender. Since most lending institutions provide a home loan EMI calculator, you can check who’s offering the most affordable repayments and choose them. This way, you will conveniently repay for the remaining tenure without worrying about hefty EMIs. Before switching your lender, remember to check the processing and legal charges involved.
Making a larger down payment
RBI generally allows lenders to finance 75-90% of the housing cost. You must pay the remaining amount by yourself as the down payment. Down payment determines your loan burden. If you make higher payment upfront, you significantly reduce your interest amount as you will pay interest on a smaller sum.
It will automatically ease your long-term financial stress, as the monthly EMIs will be lower.
Paying an extra EMI
As a salaried employee, you can use your annual bonus or incentives to pay an extra home loan EMI, apart from the regular repayments. This will help you clear off the debt faster and reduce the overall financial burden in the long run.
Choosing the right lender
Ultimately, opting for the right financial institution can make your borrowing experience convenient. Therefore, you must compare various lenders’ offerings. Select a home loan offer with easy loan eligibility terms, competitive interest rates, flexible repayment plans, and quick disbursal facilities.
Read the fine print and understand additional charges, like processing fee, prepayment charges, loan transfer fee, etc., before approaching your lender.
To sum it up
From making a healthy down payment to opting for paying an extra EMI yearly, smart financial planning can help you quickly reduce housing finance burdens. With these helpful tips at hand, you can easily avail yourself of home financing and repay it conveniently.