Buying a home is every individuals dream, be it a woman or a man. Owning a house is a big thing, even thinking about owning one is a brave task. The decision requires a lot of emotional and financial support from the family and thus, most of the times we give up on our dreams. But, this won’t happen no more! You don’t have to compromise your dream because of financial issues. Financial loan is a blessing for people who dream big, but can’t afford it. If you follow a strategy throughout, you can turn the home loan in your favour.
Here are 4 tips that will reduce your Home loan EMI and make the repayment easier.
1. Apply for a home loan and personal loan simultaneously
This may sound unusual, but this trick actually proves beneficial and saves you fro unforeseen financial fix. Instead of taking one home loan, take two loans to purchase your home. This will help you manage the downpayment and the overall cost of the house without even disturbing your monthly budget. Nope, taking a personal loan for paying the down payment cost won’t make it difficult for you, instead, it will help you.
How would it benefit you? You can claim income tax benefits by following this strategy. Let’s say you pay around Rs 1 lakh annually as income tax on your gross income and total interest of both the loan cost youRs 95 thousand annually, you will be eligible for an income tax benefit of Rs 95 thousand. This means you will have to pay only Rs 5000 as income tax in that financial year. This extra benefit helps you pay for 2 loans at the same time, without spending even a penny more than what you were already liable for. In a way, you’re using the income tax returns to pay the interest on the two loan.
2. Redirect your investments to prepay your home loan
As long as your loan is not settled, you’re going to spend most of your time worrying about the EMIs. As experts suggest, to reduce the total payable amount that you’re liable for, redirect your investments towards the prepayment of your loan. This is especially suggested in case the total income generated from all the investment is lesser than the interest paid on the loan. Why? Because even with your investments you’re not earning more than you’re spending, you’re eventually paying the difference (Interest on loan – Interest from investment). How will this help? Let’s say you have an investment worth Rs 5 lakh and the home loan amount is Rs 30 lakh. The interest rate imposed on your loan is 9% p.a and the repayment tenor is 10 years. Now, if you chose to use the 5 lakh investment to pre-pay the loan, your EMI will reduce to Rs 31669. Considering the situation, if you don’t use the investment for loan prepayment, your EMI will be Rs 38003. I hope you’re able to understand the difference the strategy can create in your life. Redirecting your investment towards prepayment of your loan is saving you Rs 6304 every month, Rs 75648 every year, and Rs 756480 in 10 years.
3. Home loan balance transfer
With such a high competition in the market, there are chances you’ll find a bank or NBFC offering a lower interest rate on the home loan as compared to your current lender. Lower interest rate means your total payable amount will be lesser. So, if you believe that, apply for home loan balance transfer and transfer your home loan from your existing bank to the new one. The lower interest rate will reduce the total payable amount and the monthly EMI.
4. Use your extra income towards loan prepayment
Extra income from sources like monthly, quarterly, or annual bonus from your employer; cash rewards, lottery etc can bes used for prepayment of the home loan. The focus is to decrease the principal amount which will directly affect and reduce the monthly EMI along with total payable interest.
Hope this investment strategy works in your favour. Let us know if you have any query or suggestion for us.