Five ways to deal with a hike in home loan interest
by Litty Jose Finance AnalystHome loan
interest rates are set to go up in the coming times. In some cases, your banks
may already have increased your rates. This hike in loan prices is attributed
to inflation, rise in crude oil prices and the drop in the value of the Indian
rupee.
The rise in
home loan interest rates will affect not only new home owners, but also those
with existing home loans. If your bank does not increase your housing loan
interest rate, they can still increase the tenure on your loan, which means
you’ll be paying more in interest.
If you’re
planning to get a home loan in the near future or you already have here are some
ways you can deal with the rise in home loan interest rates.
1. Calculate your income to debt
ratio: Before getting housing loans you should always compare your income to
debt ratio. This means calculating how much you can save after paying your
monthly EMIs on your loan. This will help you ensure that you have something to
fall back on if there is any fluctuation in the market and you can afford your home loan
interest even if it goes up during the
tenure of your loan.
2. Prepay your home loan if you can: Banks
usually won’t increase interest rates for existing home loan customers, instead
they will extend the tenure of your housing loans, which means you will have to
pay more anyway. If it is possible and your income permits it, increase your
EMIs, this will help you prepay your home loan
and save more money.
3. Use your extra income to pay your
loan: Saving is important, but when you have housing loans to pay off, it is
better to pay it, rather than save. If you receive any extra income in form of
inheritance, bonuses or even a lottery, use that money prepay your loan, so you
don’t have to worry about home loan interest increasing.
4. Opt for fixed rates: Always opt for
fixed home loan interest rather than floating rates. This way you have to pay
the same EMI every month and don’t have to worry about paying more or less
every month.
5. Pay more whenever you can: If you
happen to have more disposable income in a certain month, use it to make lump
sum payments on your housing loans. This will help prepay your home loan.
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Created on Aug 22nd 2018 00:34. Viewed 508 times.