A home loan is a long-distance commitment since its payoff can be up to 30 years. This loan lets you buy a house along with tax benefits; however, it also affects your existing and future finances. Therefore, you can pay off the debt as quickly as possible by properly monitoring relevant considerations such as the maturity period and monthly payments. If you're looking to foreclose your current home loan, here are a few ideas that will help you handle it smartly.
Choose the home loan duration as short as possible. Tenure is an important factor to remember when you intend to close your home loan early. You can opt for a loan term as short as possible so that you can easily repay the loan. However, this will also mean taking out a greater repayment rate, since tenure specifically affects the home loan EMIs (Equated Monthly Instalments). The shorter the length, the higher the EMI, and vice versa. Therefore, assess your financial situation well before selecting a loan term so that you can pay EMIs without sacrificing your lifestyle or other financial objectives. Longer-term means lower EMIs, allowing you to repay the loan more easily without stretching your finances too much. Yet longer-term also leads to higher borrowing rates when you bear interest for a longer period of time. Using the Home Loan EMI Calculator to get to the EMI that you can pay for. This online calculator measures the EMI value instantly based on the specifics of interest rate, loan tenure, and loan number.
Increase your EMI home loan over time Of all the forms of loans offered on the market, a home loan has the longest maturity duration. City Union Bank home Loan provides a median loan term of 40 years. The income of the borrower is supposed to rise over such a long period of time, particularly in the case of salaried professionals. If you are working or in a career where you expect your salary to rise with time, aim to increase your EMI home loan steadily. Prepayment of your home loan by higher EMI will minimize the amount of your unpaid loan.
Wherever practicable, pre-pay your home loan Home loan prepayment from time to time is a fast way to reduce your loan obligation, as it ultimately limits the length of your loan. It also allows consumers to greatly save on net interest rates. Earlier, lenders used to charge nominal part-payment and foreclosure premium on floating interest rate home loans. However, as per the RBI guidelines, banks, NBFCs, and HFCs are unable to impose these fines.
Opt for balance flow at the lower interest rate of home loan Another option to close your home loan early is by Home Loan Balance Transfer (HLBT), where you move the remaining loan number to another lender with a lower interest rate.
However, before taking this measure, you should remember these points regarding the new lender:
Should offer lower interest on home loans relative to the existing cost of home loans
Loan conversion rates need not be large in terms of paying fees on loans and other payments.
If the appeal for this was rejected by the new lender, the extra home loan could be issued.
Must have extra features and advantages
Transferring the balance of the home loan in the early years of the loan term would help you dramatically save on interest payments. And by doing so, you should stop extending the length of your loan. This is because homeowners typically spend the bulk of the interest portion during the initial years of their loan, so the transfer of the home loan balance will not lead to substantial savings if you go for a higher term again. Holding the current tenure the same as the residual tenure on the original home loan would save you from future interest charges.
However, if you are under financial hardship, you could consider extending the length of the loan, as this will reduce the pressure on the EMI. And in case of availability of some discretionary income from your job bonus, hike, any kind of business benefit, or savings, you still have the option of prepayment. So, go to home loan balance conversion only if it helps to save substantially or reduce the financial pressure.
Comments