The exponential growth of the real estate sector in India has also surged the demand for home loans in this country. These loans are well-known among aspiring home buyers for their wider range of benefits. Moreover, it is a secure way to invest in properties, be it to purchase or construct.
However, successfully managing the housing loan repayments can be a difficult task. Since EMIs are expensive and constitute a significant portion of their monthly expenses, borrowers often struggle to manage their repayments.
Thus, here are some tips to help aspiring homeowners reduce their struggle with home loan EMIs.
Tips to reduce struggle in housing loan repayments
- Make partial prepayment
Partial prepayment is an effective way to reduce the struggle with housing loan repayments. If a borrower can part prepay a substantial amount, it reduces the principal of their loan. Hence, it decreases their total debt amount, and subsequently, their EMIs become more affordable.
- Choose the right interest rate
It is essential to choose a suitable home loan interest rate in the beginning. Interest on a home loan is calculated in three ways –
- Fixed interest rate, where the rate of interest remains constant throughout the tenor.
- Floating interest rate, where the interest rate on the home loan fluctuates depending on the external benchmark rate followed by a particular lender.
- A mixed interest rate is a combination of both fixed and floating rates of interest. Here, the home loan interest rate remains fixed for a particular period, and after that, it switches to a floating interest rate.
Every interest rate has its own set of benefits; thus, borrowers must select their home loan interest rates carefully to avoid any difficulty during repayment. They can take the assistance of a housing loan repayment calculator for this purpose.
- Refinancing the current loan
Refinancing or balance transfer is an efficient way to combat any struggle that a borrower may face during housing loan repayment schedule. This facility, offered by various HFCs, allows individuals to shift their home loan from one lender to another.
If borrowers are not happy with their current lender and managed to negotiate a better deal with another lender, then they can opt for this facility. The primary reason behind home loan refinancing is a competitive interest rate and other added benefits.
Additional Read: Know-How the Home Loan Repayment Works in India
- Revising EMIs after every year
Financial institutions allow borrowers to review their EMIs after each year. It gives homeowners an opportunity to evaluate their financial condition. If they are facing any problem with the existing EMI structure, they can negotiate with their lender to revise their monthly installments. It can help them to make a beneficial change to their housing loan repayment.
Last but not least, borrowers can make a higher down payment when opting for the loan will reduce the principal. As a result, the EMIs will decrease and help them to manage their repayment more efficiently. A higher down payment is a great way to reduce home loan tenor and EMI.
To conclude, home loans are typically high-value loans with a prolonged tenor associated with it. Therefore, if borrowers do not have proper financial planning in place, then they may struggle to manage their housing loan repayment.