Pre-payment Of Home Loan Possible With Minimum Loss

Pre payment of Home Loan - Housing Finance Companies maintain data

, according to which the average tenure of a home loan is about 7 years because borrowers choose to pre-pay loans as they upgrade their homes. But when pre-pay in case of relocation can be very expensive.

Although there is a way to avoid such a situation from arising, it is to speed up your repayment. You can pre-pay in small parts (which are allowed by most lenders).

Some pointers if you decide to pre-pay

You should not be an over leveraged borrower.

You should have spare cash for disciplined investment.

You may have to cut down on your lifestyle for a short while to provide additional money.

If you decide to pay your loan faster than the agreed tenure then follow the simple steps:

You could open a RD or recurring deposit account or invest in SIPs.

Look out for instruments that offer easy exit clause (that is, instruments that give you short term gains, liquidity and returns.

Assign a part of or entire bonus for prepaying the housing loan as it will bring down the principal and thus the interest thereof. However, it should be kept in mind that you need to meet the expenses and investments for long-term financial plans before you earmark the entire bonus. Home loan is a good debt as it creates an asset and get you tax benefits as well.

Step up your premium is not very effective but a much used option by borrowers. Lump sum payment had a direct impact on principal and is straight forward. Increased EMI after the interest cost, which is constant, the balance would go towards servicing the principal is not a very clear cut approach but much used but STEP 3 is more effective.

Pay 1 EMI before time. Any payment made in the time period between loan disbursal and first EMI is directed towards principal payment and reduces the overall interest cost.

Select schemes that suit your need. Look for schemes that allow maximum part-prepayments in a given year. As some banks allow such payments once a year whereas some banks allow such payments 3-4 times a year, subject to an overall ceiling of 25% of the outstanding amount.

Many banks offer home saver loans in which you have to pay interest only on the utilized amount rather than the entire disbursed amount. In such loans, a current account is linked to the loan account. For example, if you maintain a balance of Rs.15 lac in the current account, you have to pay interest on Rs.35 lac even if the actual loan amount is Rs.50 lac. This allows you to increase the balance and withdraw if need be. And interest rate gets adjusted accordingly.

Now you know all there is to know about the pre-paying a your home loan with minimum losses.

by: Dealfor Loans

POST COMMENT

All The Ways In Which You Can Perfect Your Outdoor Experience carpeting vs hardwood or laminate flooring Cold And Flu Treatment And Effective Home Remedies For Cold And Flu Taking Few Factors Into Consideration Before Buying Outdoor Led Signs Digestion And Digestive Problems Treatment And Home Remedies For Digestive Problems Home Tutoring Qnap Nas Drives For Home User Give A Mysterious Sense And Touch To Your Home With Custom Fountains Stunning Austin Real Estate Investment Advantages Of Making Soap At Home Bedroom Furniture – How It Can Make Your Room Look Better Real Estate Investing: Tricks To Reduce Home Building Costs Get your Dream Home without any hassles