Who doesn’t dream of owning their own home? And with the readily available home loans offered by various banks and NBFCs, it has become quite simple to fulfill this dream in the present day. But the burden of repayment prevails as you begin to repay it. The principal amount of a home loan can be quite high compared to other retail loans. So, here are a few tips that you can follow while planning for your home loan repayment.
1.You must make sure that your interest cost is low. You can compare various home loan offers and shortlist loans where the home loan interest rates are most beneficial. Being a long-term loan, even a marginally low interest rate can give you significant savings.
2.While availing of the home loan, if you make a higher down payment, it will reduce your principal amount. This is beneficial as it will reduce the loan amount and your interest cost, and EMI payment.
3.If you opt for the prepayment facility for a home loan, it will reduce your burden of loan. But remember not to stretch your finance to the maximum. Make sure you have enough finance in hand after the prepayment to meet unanticipated situations. Also, keep an eye on any prepayment penalty or charges that may be applicable.
4.Another important aspect of prepayment is not to make the prepayment in the mid-late period of your home loan. The reason is that the interest payable is higher during the preliminary stage. If you have already managed to overcome the burden for more than half the loan tenure, you should invest your additional finances elsewhere and earn higher returns.
5.If a lump sum prepayment is difficult for you, making an extra EMI payment along with the regular ones every year can also be helpful. It lessens the burden of interest and shortens the loan tenure. Since you are paying more than your regular EMI amount, it will reduce the outstanding principal amount.
6.Another effective tip is to try and increase your EMI amount by 5% every year, particularly if you receive any bonus or salary increment. This will reduce the weight of your interest repayment. A home loan EMI calculator can be used to compute the monthly EMIs and interest portion therein.
7.You can also renegotiate your home loan as per the applicable marginal cost of funds-based lending rate (MCLR). You can claim an advantage of the change in interest rates. Do a cost analysis to know if rebooking your home loan interest rate will be profitable to you.
Conclusion
With these efforts, you can make small improvements in your home loan liability and end up saving a significant amount cumulatively. If you identify a credible lender with a strong customer service background, competitive interest rates, and transparency in service, you can transfer your existing home loan and reduce your repayment liability further.