3 Simple Steps For Effective Home Loan Management
The most significant financial choice that most individuals want to make is buying property. Given that owning a home is expensive, many people choose to borrow money for it. A home loan from a bank or mortgage lender is a good option.
Housing loans are secured loans obtained by pledging the property as collateral to the lender. They offer high-value financing with low house loan interest rates. Furthermore, they also have long repayment terms. They are repaid through EMIs. Following repayment, the borrower receives possession of the property.
3 Simple Home Loan Management Practices
- Opt for home loans with lower interest rates
As a borrower, choose housing loans that are available at affordable interest rates. This is the first step to consider before opting for a home loan. It will help with paying your EMIs in the future. Interest rates tend to fluctuate. So, make sure to do thorough research for low house loan interest rates before arriving at a suitable loan option.
- Enhance your EMIs
Once you avail yourself of a home loan, you should keep a constant monetary check on the EMIs. Hence, it is recommended to increase your monthly repayments. Home loans offer huge financial support to the borrower. However, the repayment of such a heavy amount in a short period can be possible by increasing your EMIs. This routine monthly practice will prove quite effective and helpful in the long run.
For your convenience, you should use a loan calculator. Assess your monthly expenditures. And, make enhancements to your EMI accordingly.
- Opt for the partial repayment option
Getting a loan cleared is the primary concern of most borrowers. The best way to achieve this objective is by opting for partial repayments. This will cut a significant chunk of your loan repayment amount. Besides, this practice also ensures a cut on excessive interest payments. As a borrower, EMI enhancement and partial repayment are potential practices lowering the burden of your loan.
What Is the Importance of Home Loans?
Everyone wishes to enjoy the security of their home, and getting a home loan can help them get it. Obtaining a house loan comes with many benefits, including:
- Tax Benefits
On mortgage loans, the government provides tax advantages. Under Section 80C and Section 24B, individuals are eligible for tax refunds that extend to 1.5 lakh rupees and 2 lakh rupees, respectively. Newly built residences are not eligible.
- Reduced Rates of Interest
Housing loans are available with fixed as well as adjustable interest rates. They also have lengthy terms. If house loan interest rates are floating, you will enjoy declining ROIs.
- Enhanced Assets
Property investment is a rising asset class. You can buy a home today that is sure to increase in value tomorrow by taking out a mortgage. The business of buying residential houses will keep prospering. This is due to India’s young population and a growing desire to own a home.
- Stay Liquid
It is recommended to preserve or invest your liquid assets if you have access to them. As life is erratic, it frequently throws our plans into a loop. You can experience a liquidity crisis in the future if you use up all your available cash to buy your favourite house in one go. Home loans enable you to maintain liquidity while only paying a small chunk of your salary or savings in the form of EMIs.
- Rent Relief
If you do not want to move frequently and keep wasting money on rent, applying for home loans to purchase a home is the best alternative. It gives you the freedom to decorate your home and live your life as you wish, while also providing enough space for each family member.
- Refinancing Facility
Home loans give borrowers the option of transferring a particular loan to another institution or lender to avail themselves of a feasible return on investment. Unsatisfaction with your current home loan ROI or the representatives of the institution should motivate you to make a shift. This shift should offer lower rates of interest and good service.
Selecting a Low House Loan Interest Rate
Opting for a low interest rate is one factor to consider when applying for a home loan. You can borrow money from lenders to pay for a home at a predetermined interest rate. And, when you begin repaying the loan, you also have to pay the interest.
Usually, there are two types of house loan interest rates:
- Fixed interest rate
Simply put, a fixed interest rate is one that the bank or lender decides will not change during the loan. You get the advantage of knowing your loan repayment amount before you sign the loan agreement. Throughout the term, your home loan EMI will also not change.
- Floating interest rates
A floating interest rate changes in response to market developments. Depending on how the market is performing, the rate would increase or decrease. Your interest payment may go up or down if the interest rate is variable. As a result, your EMIs will also rise or fall.
Lenders have different interest rates that take competitive factors into account, ranging from 6.5% to 13% p.a. You may calculate the interest by using an EMI calculator. There, you only have to enter the loan amount, loan payback period, and interest rate. Once the details are filled out, you receive a complete overview of the loan, including the amount due.
Conclusion
Buying a house is a huge step. It is a cause of stress, but at the same time, it provides a great sense of achievement. It is challenging for an average person to buy a home purely out of savings, given the skyrocketing real estate prices.
On the contrary, home loans not only enable you to buy your dream home but also provide other benefits. These loans have low interest rates. This makes them a central part of investment portfolios. They also aid in claiming an income tax deduction of up to Rs. 1.5 lakh for the entire interest paid on the home loan.
Piramal Finance has various other blogs on home loans that you must check out. You may also take a closer look at the various financial services and products they offer.