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5 Cost Effective Ways to Repay your Home Loan
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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
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The dream of becoming a home owner is coming true for many people, all thanks to the simplified process of availing a home loan. In today’s unpredictable world, many people find it challenging to manage their finances due to long term EMIs on a home loan. However, the following cost-effective ways will help you to manage financial responsibility of your home loan effectively.
Selection of an appropriate home loan tenure period
Many people often go for a shorter tenure as they wish to pay off their home loan as soon as possible. However, it may result in financial stress. Generally, Up to 60% of instalments-to-income ratio is considered by lenders. In other words, the annual income influences the tenure of a home loan.
Therefore, if you select a more extended repayment option, you get a longer time to repay debt with lower EMIs. The longer duration of repayment stabilises your cash-flow. Furthermore, when you gather additional funds via bonuses at work or profit in business, you can always utilise them to pre-pay the loan as per your convenience.
Pre-payment of the home loan
Home Loan Prepayment with lump-sum amount does not only reduce the future payable interest on it, but also decreases the long-term liability. There are many financial institutions that do not charge for pre-paying or partially paying the debt. You can use the extra funds acquired from a bonus on salary, gains on stock and shares, tax-saving investments and so on, to pre-pay the home loan.
Management of funds
Sometimes, people hold certain investments that are not giving them satisfactory returns. Moreover, some investments tend to turn futile over time. If you have any such investments, eliminating them will help you to better manage finances to repay your home loan.
Based on your risk appetite, diversify your finances acrossd different financial assets. Once you do this, you will be able to understand your investment portfolio and then move on to managing your cash-flow towards paying EMIs.
Change your loan lender to a low-interest rate lender with a Home Loan Balance Transfer
RBI has instructed all Indian banks to provide their customers with fair interest rates aligning with the guidelines of MCLR. Watch out for changing trends as many financial institutions keep lending rates updated with the current market interest rates. Changing your lender will allow you to transfer your whole outstanding home loan balance to other lender offering you competitive interest rates at better terms and conditions.
Be punctual about monthly payment
Never fail to pay the EMI of the home loan as it will eventually take a toll on your entire financial status as well as affect your credit score. Once your credit score is impacted, it becomes difficult to obtain any other type of loan in the future. One of the best ways to be punctual while paying EMIs is taking the help of a home loan amortisation schedule.
These are like time tables that help you to find out everything related to payments involved in your home loan, EMIs, home loan interest rate, to principal and outstanding balance. The home loan amortisation schedule provided by your bank while availing a home loan will make it easy for you to manage home loan EMIs.
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