It is said that buying a home is the biggest purchase in an individual’s life. However, majority of the people use a home loan to make a home purchase. Obtaining a home loan involves several aspects, such as credit score, employment, income, liabilities, etc. So, anyone who meets the eligibility criteria can apply forhome loan.
Home loans are one of the long-term financial commitments you may commit in your lifetime. Therefore, ensuring that the home loan repayment process ends without hassles is essential.
Over the years, many people have struggled with the home loan repayment process. In this article, we have put together some effective ways to end or close your home loan easily without burden.
Prepayment of Loan Is a Good Idea
The interest rate charged by your lender heavily influences the amount of your home loan, so you should try to prepay if you have taken the loan. A regular prepayment can significantly reduce your loan balance and interest payments.
In either case, whether you have a Micro and Small Business loan or an Individual Floating Rate Term Loan for Personal Use, you may or may not be penalised if you pay off the loan early or foreclose.
Generally, it is not permitted to prepay or foreclose until the first six months of the EMI are over.
Prepayment fees may apply to fixed-rate loans, so you should check with your lender or bank to determine if you will be charged a fee for prepaying your loan.
Make a Larger Down Payment.
The down payment for a property is usually 20%-30% of the property’s price from your pocket, and the remainder is lent to you by the bank as a mortgage loan. However, you should put down as much money as you can.
In other words, the amount you put in as a down payment may significantly impact your total loan balance. This is because a larger down payment means you will be borrowing less money, which in turn means that interest will be paid less.
Choose a Shorter Term
A loan’s interest rate depends on several factors, but the length of time you’ve had the loan is one of the most important. It is possible to lower your monthly payment by paying back the loan over a more extended period, but if you pay it off over a shorter period, you will save on interest over time.
For short-term loans, you can see how much interest you will save by using a home loan EMI calculator. If you wish to avoid paying more interest over the term length of your loan, consider the term length carefully.
Raise Your EMI Payments
Your income may rise throughout your home loan repayment period. By raising the EMI, you may put some of the increase in your income towards loan repayment.
Depending on the financial institution, you may be able to adjust your payment schedule once a year. It’s an intelligent way to reduce debt and repay your loan sooner. You will save much on interest if your loan provider has such provisions.
Paying off your mortgage early eliminates your principal balance and reduces interest payments.
Refinance Your Home Loan from Another Bank
When your interest rate is considered excessive relative to the current market scenario, you may wish to consider switching to a lender who offers a lower rate. Most banks provide this service to attract new customers.
Taking advantage of switching is only possible if you do it early in the payback cycle. You’ll lose much money on interest if you wait too long to switch. Also, you’ll have to pay a percentage to transfer the loan and repayment charges.
The Bottom Line
Home loan commitments require severe consideration and responsible action. Although getting a loan is simple, repayment may prove challenging.
Your monthly budget can be significantly affected by the EMIs on a home loan if you do not plan. As a result of carelessness, you may be required to pay more interest on your loan than necessary in some instances.
Thus, it would be best to consider the above options to streamline the repayment process and reduce your monthly loan payments. However, you must be careful not to compromise your family’s regular living expenses because you attempt to pay back the home loan early.