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- dEsPeraTe cRaNky -
You can take steps to save money both before and after you take a home loan. Here we share some smart tips that can help you.
Before you get a home loan:
1. Shop around for the best lender: Research the market well before you finalise a lender. Some key points to keep in mind when shopping for a home loan lender are:-
a) Ask each lender for the type interest rate they charge, and if the rate might convert into a higher rate in future if it’s a floating rate that they are offering
b) Understand the lender’s charges like processing fees, late payment fees, and prepayment and foreclosure charges.
c) Compare each lender's requirement for the down payment towards your property purchase.
d) Cross check the time lenders take to process and disburse the home loan from people who have had the experience of taking a home loan before.
2. Decide between an increase in tenure or an increase in EMI: If you have the capacity to afford a higher EMI, you should ideally take a home loan for a shorter tenure. For instance, if you can afford it consider a 15-year term loan instead of a 20-year term loan, despite a higher EMI for the former, for the following reasons: -
a) You will be able to repay the loan faster, and
b) The interest component of the EMI will be comparatively lesser
On the other hand, the longer the tenure of the loan, the greater is the cost of borrowing. However, a longer tenure will make you eligible for a bigger loan amount despite the same income level.
After you take a home loan:
1. Consider refinancing in case of better interest rates in the market: Refinancing can help you save on your EMI. Consider refinancing your existing loan if there are lower interest rates available in the market and if you are not required to pay a very high balance transfer fee.
2. Pre-pay your loan in case of surplus funds: If you have surplus funds in a bank, even after you have provisioned for all your expenses and emergencies, you should consider prepaying part of your loan
3. Strictly avoid late payment charges: Pay your EMI on time otherwise you might be charged a late payment fee. For instance, a cheque bounce charge can typically be Rs.100 in case of an insufficient account balance.
Before you get a home loan:
1. Shop around for the best lender: Research the market well before you finalise a lender. Some key points to keep in mind when shopping for a home loan lender are:-
a) Ask each lender for the type interest rate they charge, and if the rate might convert into a higher rate in future if it’s a floating rate that they are offering
b) Understand the lender’s charges like processing fees, late payment fees, and prepayment and foreclosure charges.
c) Compare each lender's requirement for the down payment towards your property purchase.
d) Cross check the time lenders take to process and disburse the home loan from people who have had the experience of taking a home loan before.
2. Decide between an increase in tenure or an increase in EMI: If you have the capacity to afford a higher EMI, you should ideally take a home loan for a shorter tenure. For instance, if you can afford it consider a 15-year term loan instead of a 20-year term loan, despite a higher EMI for the former, for the following reasons: -
a) You will be able to repay the loan faster, and
b) The interest component of the EMI will be comparatively lesser
On the other hand, the longer the tenure of the loan, the greater is the cost of borrowing. However, a longer tenure will make you eligible for a bigger loan amount despite the same income level.
After you take a home loan:
1. Consider refinancing in case of better interest rates in the market: Refinancing can help you save on your EMI. Consider refinancing your existing loan if there are lower interest rates available in the market and if you are not required to pay a very high balance transfer fee.
2. Pre-pay your loan in case of surplus funds: If you have surplus funds in a bank, even after you have provisioned for all your expenses and emergencies, you should consider prepaying part of your loan
3. Strictly avoid late payment charges: Pay your EMI on time otherwise you might be charged a late payment fee. For instance, a cheque bounce charge can typically be Rs.100 in case of an insufficient account balance.
