Managing a Home Loan Could be Difficult – Here’s How to Do it Efficiently

by MyMoney Mantra FinTech (Financial Technology)

In today’s circumstances, it is difficult to purchase a house without a Home Loan. The Government of India is giving concessions on the income tax front to Home Loan borrowers. Hence, the average age of the Home Loan borrower is becoming lower as people in their twenties are also opting for Home Loans.

Today, you have double incomes in almost all the houses. Hence, the Home Loan eligibility is increasing at a reasonable rate. But, the bigger the Home Loan, the more difficult it is to manage. These are some simple ways of managing your Home Loans efficiently.

A far-sighted approach helps a lot

You calculate your Home Loan eligibility based on your current income. Accordingly, you estimate the EMI (Equated Monthly Instalment) using the Home Loan EMI Calculator. It is also important to consider some contingent liabilities like educational expenses of your children. Set aside some amount of your income towards meeting such costs. Hence, it is better to opt for a more extended tenure. You can always pay more than your standard EMI.

All families do not face the same kind of problems. Hence, you should tailor your approach to suit your requirements.

Some tricks to manage your Home Loan better

1. A more prominent down payment reduces your liability

Banks calculate your Home Loan eligibility based on your income and not your savings. Hence, it is better to utilise the savings towards making a down payment. If you have a substantial amount in your savings account, you can make a more significant down payment. Banks approve loans up to 80% of the value of your house. However, it is not necessary that you should avail it. You can reduce your loan liability by offering to pay a more substantial down payment. You save on the interest aspect as well.

2. Choose a larger EMI

Do we sound contradictory to what we had stated earlier? No, we are not because the problems in every house need not necessarily be the same. If circumstances are such that you have a more significant disposable income on your hands without any imminent substantial liabilities, it is better to opt for a prominent EMI. You could end up closing the loan much earlier than you thought. A higher income can tempt you to use the excess amount unproductively. You can channelise the amount towards repayment of your Home Loan and get rid of the liability as quickly as possible.

3. Pay more whenever it is possible

You might get a sudden salary hike along with arrears. Your money back life insurance policy might fetch you good returns. You could earn a windfall in shares. In short, you can receive substantial funds. One of the better ways of utilising this amount is to make a prepayment of your Home Loan. Banks do not charge any prepayment penalty when making a premature payment into your loan account. It will reduce your principal amount and help you save on the interest component.

4. Close your other loans

If you have other expensive loans like Credit Card debts or Personal Loans, you can use the excess funds to close these loans as well. The aim is not to let any additional expense affect your Home Loan instalment. Reducing your other liabilities frees up some amount for repaying your Home Loans.

5. Try a Home Loan Balance Transfer (HLBT)

There is intense competition in the industry. Banks compete with each other to reduce their Home Loan interest rates and gain more customers. If you find your bank is charging a higher rate of interest, you can always opt for a Home Loan Balance Transfer. Compare the rates of interests of other banks and Apply for a Home Loan Balance Transfer. You can take the help of loan service providers for comparing various products of different banks on a single screen. It is most beneficial, but you should look at other aspects because an HLBT can result in higher expenses like processing fees, mortgage stamp duty, cancellation and registration of equitable mortgage, and so on. Consider all these aspects before deciding to opt for an HLBT.

Remember not to miss the repayment of any instalment as it can adversely affect your credit history. No, managing a Home Loan should not be difficult now. You can use these tips to effectively manage your Home Loan portfolio and ensure that you build up a strong credit score.

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