Apply for home loan these days can hamper your years or even decades of savings, so getting a home loan is the only option for most people.
However, Apply for home loan are one of the biggest financial commitments as they have a longer tenure than other loans. EMI can withdraw a large part of your income for a long period towards a single home loan. As a result, you have little space left for your savings and investment. Thus, it becomes very important to reduce your home loan burden.
Here are some tips to reduce your home loan Cumber:
Increase repayment with an increase in income
The simple way to reduce your home loan burden is to repay it fast. This can be done by bumping up EMI with your rising income.
Apply for home loan: Let us understand this better- Suppose you have a home loan of Rs.30 lakhs for a period of 20 years. Your EMI is 29,000 on this side. Assuming that you get an 8% salary increase in a financial year. Your increment will increase your income but what will be the benefit if your financial obligations remain for a long time. To reduce your home loan burden – you can easily increase your EMI by 5% without affecting your budget. Doing so will increase your contribution towards EMI, resulting in a comparatively shorter period of your home loan. Every time you get an increment, your home loan will definitely end faster.
Another advantage of this is that you can save on interest as well.
Home loan balance transfer option
Apply for home loan in India: A longer tenure means less EMI and most of us consider taking a longer tenure home loan to reduce the EMI burden. Although tenure is one of the factors that reduce your debt burden, you cannot ignore the fact that with longer tenure when you pay more on interest. This on the same hand increases the total cost of borrowing.
Apart from all this, another way to reduce your home loan burden is to go for home loan balance transfer.
This has been suggested because home loan balance transfer has the potential to reduce the total cost of your borrowing.
Apply for home loan in India: Suppose you have a home loan with Bank X at an interest rate of 8.55%. It has been 4 years and your home loan is in progress, and you find that Y bank is offering home loan for the same plan at 8.25%. A home loan balance transfer is a facility that allows you to easily switch your home loan from Lender X to Lender Y. Doing so can save a lot and reduce your overall cost of borrowing. To avail the balance transfer facility, you have to check with your lender at the time of lending.
To avail the facility, Apply for home loan balance transfer with a new bank. If your application is approved, your new lender will give you a check with your current lender’s name for your home loan balance. Handing this check over to your existing lender will close your home loan account with them and now you will have your home loan account with a new lender.
Go for Greater Initial Payment
Given that the RBI allows banks to spend up to 75% -90% of the assets in the form of home credit, borrowers need to withdraw the balance from your own pocket as a down payment.
Apply for home loan: To reduce the home loan burden, it is best to choose a higher initial installment/down payment. This is because a higher initial installment reduces the amount borrowed. And when you borrow less it becomes easier to repay. Making a high down payment may seem daunting initially, but when you go for it, you have to pay a lower EMI which reduces your financial burden. And at the same time, it also gives you scope for your investment and savings.
Pay principal amount first
Apply for home loan in India The faster you repay the principal amount of your home loan, the less you have to pay for the interest. This is the result of the lower cost of borrowing, thus reducing the burden of your home loan.