In India, the real estate market has seen an exceptional upward curve. Be it in top-tier cities or emerging markets of the country, property prices are steadily rising. Moreover, because of the growing aspirations of many individuals looking to move to urban areas and the improving infrastructure, the demand for residential properties has only increased and so have the prices.
Home loans are a strategic option for funding the purchase of your new home. These loans are carefully designed to offer affordability to borrowers. But with home loans, come with the challenges of managing them efficiently to ensure financial stability in the long run. Borrowers can successfully manage their home loans by calculating monthly liabilities, making part-prepayments and understanding the nuances of how to calculate house loan EMIs.
Ways to Manage Home Loans
Make Lump Sum Payments
Lump sum payments or part-prepayments are an effective way of managing home loans. These payments are made over and above the principal amount and can drastically reduce the total interest payable and shorten the loan tenure considerably. Consider using maturity proceeds, festive bonuses and annual increments to make a part-prepayment every year. Some lenders may levy a prepayment or foreclosure fee when payments are made in advance for fixed interest rates, typically ranging from 1-3% of the prepaid amount. Knowing about these payment charges beforehand will help you plan your budget better.
Prioritise and Schedule
An effective way to manage home loans is by prioritising finances on a need basis. Timely payments reflect positively on a borrower's credibility. Create a monthly budget that focuses on EMIs as essential as other necessities. Setting up auto payments and reminders to avoid late payments will help manage the home loan more efficiently. Sync your monthly payments to avoid missing out on a payment and stay ahead of your home loan journey. Regularly reviewing monthly spending habits will help you prepare for upcoming loan payments and stay debt-free.
Use an EMI Calculator
Effective home loan management depends on the EMI amount payable throughout the entire tenure of the loan. These payments include both principal and interest amounts, and managing EMIs well is critical to avoid financial stress and should begin well before you apply for a home loan.
When you plan your EMIs, you’re more likely to choose a loan amount and a tenure that fit your financial capacity. Without planning, there is a risk of borrowing more than you can afford, which can lead to long-term stress and possible defaults. Knowing the EMIs in advance also allows you to plan your prepayments to reduce the interest payable and pay off the home loan sooner. But how to calculate home loan EMIs?
Use an EMI Calculator
A Home loan EMI amount calculator can provide accurate insights into your EMI based on the loan amount, interest rate and tenure. This is an effective way of planning finances by choosing the right combination of tenure and amount and understanding the total interest payable. It’s ideal to try different combinations of each parameter to get an EMI estimate you can afford.
Be Future Wise
Lenders offer various home loan products tailored to the different needs of individuals, such as loans against property, home renovation loans, home extension loans, rural home loans, home loan balance transfers and more at reasonable terms, flexible tenure options, competitive interest rates and much more.
By implementing these strategies - making lump sum payments, prioritising and scheduling diligently, and utilising an EMI calculator for informed decisions – you can gain greater control over your home loan. Proactive management not only reduces your financial burden in the long run but also brings you closer to the ultimate goal of owning your home free and clear.
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