Everyone dreams of owning a house; but quite often it becomes a tedious job – not only because it takes time to finalise on the right property but also managing the finances surrounding it. Contrary to what the advertisements suggest, applying for a home loan can become quite the task – in terms of finding the right mix of interest and EMI amount.
Additionally, on an average it takes around 15-20 years for the repayment of the Home Loan. Therefore, your top-most priority should remain speedy closure of Bank loan.
Here are a few tips to manage your home loan effectively;
Payment of loans should be first on your priority list. Try paying off whatever you owe as soon as possible is a habit worth adapting for. Schedule the EMI payments near your Salary date to ensure the availability of funds for the repayment and to avoid any situation leading to the insufficiency of funds and any penalty charged by the Bank.
Compare your monthly payments (outflow of funds) with monthly returns (inflow of funds) on investments. For instance, if you find that certain investments are not giving enough returns or have turned futile over time, it will be beneficial to close those and pool in the funds towards the EMIs on your home loan. Try to save some money by investing in options that give returns slightly on a higher side than the normal market returns*. You could use the differential amount to pre-pay your loan.
(* ensure you consider the risk involved)
Try to make some EMI’s lumpsum payment or prepayment to wave off the stress in future. Grab the opportunity, in case of any Salary hikes to increase the EMI amount. Thus, reducing the interest payment on the Loan.
Aim for paying an extra EMI every year. Use that bonus you received in the office to pay for an extra EMI every year. You can save some amount aside for paying that last EMI of the year.