For most Indians, it’s once in a lifetime dream to own a home. Sadly, the EMIs of our home loans eat up a huge chunk of our income for a major part of our life.
So, it’s natural to want to break free from the burden of your EMIs as soon as possible. Borrowers are often in a hurry to prepay their home loans. So they act hastily and take some steps that backfire. Such unplanned decisions could end up costly in the long run.
Here in this article, you can find tips and guidelines to foreclose your home loan in the best manner possible.
Mistake #1: Wiping your Entire Savings to pay off the loan partially or wholly
The thought of having your entire income at your disposal without having to worry about EMIs seems pretty enticing. This makes several borrowers make the mistake of making use of their entire lifetime savings to pre-close home loans.
While on paper, this may seem like a good option, in reality, it’s far from it. Emptying all your savings leaves you with no funds to meet emergencies. Always make it a point to invest your savings in a plan that offers higher returns instead of using it to close your home loan.
Mistake #2: home loan refinance without considering the Implications
This is a common mistake. Lenders often come across other banks that offer a lower rate of interests. So, borrowers switch their home loan to another bank without considering the processing fees and other miscellaneous charges.
Sometimes lenders end up paying more due to the low differences in interest rates, closure fees, and one-time charges.
While switching to easy home loans from a low-interest provider is a sensible move, you mustn’t change without considering all these factors.
Mistake #3: Increasing the EMI to finish off the loan before the tenure
Homebuyers are so anxious to close their loans, that they are willing to squeeze their budget to repay the loan before the duration. This option may look good at the outset. Instead of spending your income on frills like shopping, entertainment, you are using to foreclose your loan.
However, when you increase your EMI, you must remember that your budget becomes stretched and you are unable to raise further loans. When your EMI exceeds the ratio fixed by banks, you are unlikely to get further loans approved in the case of emergencies.
Do’s when Pre-closing your Home Loan
- Remember that during the early part of repayment, the interest component is high. Later on, as you have paid off the interest significantly, the principal component is more. So, if at all, you’re going to prepay, make sure that you do it in the earlier portions of your tenure.
- Get back all the original documents you submitted to the lender at the time of loan application. Also, don’t forget to obtain a No Objection Certificate from the bank.
While preparing your home loan in Delhi is a lucrative option, make sure that you plan comprehensively and do it in the best manner possible.