A home of our own is something special that we tend to with all our hearts. It is one purchase where you will end up spending most of your time. Your family will grow here and so will you! Everyone wants to have a house of their own and to get there, a home loan emerges as an integral part. Taking a home loan is important, but it is even more important to clear this loan as soon as you can!
Let’s assume that you have taken a loan for the maximum tenure. Do you plan on spending all of the 30 years in paying back your home loan? You would surely want nothing more than to clear it as soon as you can, which is possible if you plan well!
Related Read: A Complete Buyer’s Guide to the Home Loan Process in India
Here are a few tips you can use if you are planning to take a home loan:
Go for a loan that allows part payments
The loan you receive at one point is based on your income & creditworthiness at that time. But we all know that over a period of time, your income will increase & so will your affordability. Even if you take up a loan for the maximum tenure, you will be able to repay more over a period & finish the loan before its tenure. Check the things you must consider to apply for a home loan & look at those banks that offer a prepayment feature so that you can make more than the monthly installment when possible.
Increase your EMI amount as your salary increases
So, it is established that your salary will grow over a period. Make sure that you increase the loan EMI as well. This will reduce the tenure & interest rates too. If you contact your lenders, they will be able to help you in restructuring your loan as per your current salary. This will also help in boosting & strengthening your creditworthiness.
Invest specifically with the aim to prepay the loan
When you start planning to take a home loan, understand that you must have some money set aside to make the down payment. In addition, if you go for a loan with prepayment features, then you can divide your investments accordingly. Your investment plan corresponds to specific goals. So, make sure one of them is clearing your home loan.
Plan a mutual fund to prepay your home loan
If you start investing in SIPs early on, they can help you accumulate a great sum of money over a period of 15 years or so. If you start by investing Rs. 3000 each month for 15 years, you will have a good sum of money at the end. Even if you go for a loan tenure of 30 years, you can use this chunk to clear off a considerable amount of your home loan. This could cut your tenure by approximately 10 years. In addition, mutual fund investments can help you save on taxes too! So, it is a double profit for you to invest in mutual fund SIP.
Direct your bonuses & other income towards the prepayment
There are chances that you have other sources of income as well. It could be rent or other variables from work. This extra income can also be directed towards clearing your home loan. You may receive a bonus from work as well. Any extra money that you receive in the year can be directed towards your prepayment.
A handy tip is that you start your research early, identify the price range that you are looking at and shortlist the property you would want to invest in. This will give you a good buffer time to prepare for the down payments as well as arrange your loan EMIs. Prepaying your home loan will not only relieve you from a major financial burden, but it will also give you space to plan for other financial milestones.
When you begin planning for a home loan, the first step should be to check your credit score in order to understand your next steps. So, pull out your CRIF credit report & move a step closer to your dream home.