Many people dream of owning a home, and home loans are a financial tool that allows them to do so. However, many people make mistakes when they are in a hurry to acquire a new home loan. These mistakes can include picking the incorrect lender, choosing the wrong plan, or agreeing to unsuitable terms and conditions. If not addressed promptly, all of this could result in a great deal of worry and financial strain in the future.
There are a number of elements that combine to influence how lenders see your repayment potential. By weighing these elements, you can avoid common traps when it comes to EMI budgeting while applying for a house loan.
Calculate monthly liabilities
Lenders are more likely to trust that you will be able to repay the loan if you have a steady source of income. If you don’t have any other debts, your bank may advise you to set aside roughly 40% of your monthly income for EMI payments. You must have calculated your monthly obligation before applying for a Home Loan. If you haven’t received one, it’s a good idea to use a free online Home Loan EMI calculator to figure out how much money you have.
Separate account for loan and savings
You’ll obtain income credits in both salary accounts if you and your spouse both work. It can be tough to track all of your account’s activities if all of your expenses are routed through one account. It’s easier to keep track of things if you keep separate accounts for loan repayment and savings. At first look, the concept may appear difficult, but the benefits greatly exceed the inconvenience.
Make part-prepayments regularly
After one year has passed from the disbursement, most lenders accept part-prepayments on home loans. As a result, you should take advantage of this opportunity and direct your extra funds to the repayment of your home loan. While some lenders do not charge prepayment fees, others charge a small fee for the convenience of prepayment. Examine the terms and conditions of your loan agreement to learn about your lender’s pre-payment terms and fees.
Look out for low interest rates
Due to variables such as a low credit score or a high FOIR, one may choose a higher rate of interest. However, you can always choose to transfer your home loan balance later. To be qualified for a Home Loan Balance Transfer offer from another lender, you must pay your EMIs on time for a year.
Do not miss out your EMI’s
Even if you manage your finances meticulously, unexpected charges may arise. If you have numerous EMIs, such as a car loan, credit card, personal loan, and so on, in addition to your Home Loan, there is a good risk you will miss your Home Loan EMI payments. If you don’t pay your housing loan EMIs for even a month, you’ll be considered a defaulter and your credit score will suffer. It’s a good idea to have your EMIs deducted automatically from your account. You will never miss a payment deadline this way. To avoid any trouble, make sure you put the money in the account at least three days before the debit date.
All of these suggestions are simple to implement and will go a long way toward assisting you in effectively managing your Home Loan EMIs. Remember that financial discipline is the key to living a debt-free, worry-free life.