Paying off a Home Loan can take up to 30 years, or even more, depending on the loan amount. It’s an amazing feeling to finally own a house of your own, but things aren’t hunky-dory just yet. A sizeable chunk of money is still taken from your monthly income.
Here are a few ways to manage payments on your housing finance.
Tweak your EMI
As time passes, you progress in your career, with raises and promotions. It’s wise decision to use this money on increasing monthly EMIs, than splurging on unnecessary expenses.
For example, if you’re paying Rs.30,000 monthly, and increase this to Rs.32,000, you’re still doing yourself a big favour in the long run.
Prepayment of Loan
Prepaying a part of the home loan amount is the best way to use the bonus that you received at work or the surplus amount that you have in hand. If there are two earning members in the family, you are bound to have some extra money in hand once a while.
Use it to ‘prepay’ your loan—paying it back ahead of schedule.
If you have invested money somewhere, and are receiving regular returns, use that money for repayment purposes. The earlier you pay off your loan amount, the more you save in terms of interest.
Live as Frugally as Possible
Paying off a Housing Finance can be a lifelong process. Try and shorten the tenure.
It may seem easier to spread the repayment over (say) 30 years, because of the smaller sums of money that go out of your pocket each month. Do the math, though, and you’ll see how big the the difference is between the 30-year EMI and (say) a 20-years EMI plan.
The roof over your head should be motivation enough for you to live economically and utilize the excess in EMIs.
Choose a destination nearby for a family vacation, cut down the number times you eat out, and make other such compromises as a family and as an individual.
This is one of the best strategies. Consider a Home Loan transfer; this is the process of moving your existing outstanding amount to a bank or NBFC that offers a lower rate of interest on home loans. Homebuyers often come across such offers from banks; all the buyer has to do is pay the EMI on the rate of interest.
It may be very tempting to increase the tenure of your loan, but hold back as much as you can before you give in. That is potentially one of the worst financial decisions in the long run.
It may seem easy now, but you’ll end up spending unnecessarily huge amounts on interest—you might even end up paying more than double of principal amount. These tips are safe and easy to carry out, they just require a little extra dedication. Follow these, and watch as your repayment process becomes a little easier!