There could not be a better time than the start of a new year to make some financial resolutions. With self-discipline in place, you can successfully adopt some good habits to meet your financial goals in time.
Whether you already have a running Home Loan account or are considering to Apply for Home Loan, you should be well aware of the financial implications of availing a housing finance. Well, of course, you will finally have your own place to reside, but it does come at a cost. A significant part of your monthly income would be dedicated to Home Loan repayments. So, it would be wise of you to adopt some useful money-saving habits & financially plan your cash flows to steer clear of cash woes during your loan tenure.
Take a close look at your financials, followed by some positive steps towards financial improvement in the coming months. Remember, even a small step can reap substantial results in the long run. Here are 5 points to consider for robust financial health despite an existing EMI structure to serve:
1. Realign your investment portfolio
As the financial markets are witnessing wide fluctuations, this goes without saying that you need to realign your investment portfolio in the New Year. Instead of starting any new investments, you should prioritize optimizing your portfolio. This realignment would involve you comparing the returns you have been generating from your different investments. Do not stick with investments that are offering you negative or nil returns. Moreover, your investment decisions should not be based on the tax you will be saving because you will be eligible for higher income tax deductions with your Home Loan account.
It will involve you taking some tough decisions such as liquidating those investments that are not faring as per expectations. As a rule of thumb, make sure that the returns from the investments should be higher than the Home Loan interest rate you are servicing. You can use this money to make prepayments towards your home loan account later on. But make sure that even after the reshuffling of the investments, the portfolio comprises of diversified investment options.
2. Look for better interest rates
Whether you are already serving your Home Loan EMIs, or are presently seeking the best Home Loan offers, never stop looking for the best of Home Loan Interest Rates. Home Loans entail a long-term financial commitment, and any haste in the decision can jeopardize your financial independence significantly. So, use any research approach that you prefer, online or offline, but make sure to collect as much information as you can. Once you have obtained the requisite information, base your decision on the APR instead of Home Loan interest rates.
Annual Percentage Rate (APR) is a better and more accurate measure of the affordability of the Home Loan. So, do not accept the first offer you will be getting, rather keep looking for better offers.
If you have a running Home Loan account, look for the option of the Home Loan Balance Transfer. Due to increasing competition in the market, lenders are offering extremely competitive rates to existing customers. For instance, if you transfer from your existing lender to Bank of Baroda Home Loan, you can avail interest rates starting from as low as 8.15%. Remember that even a reduction of 0.25% in the interest rates can amount to substantial savings for you in the long run.
3. Pay-off your loan as soon as possible
Like every other type of loan, you must ensure that you repay your Home Loan as soon as possible. There are various lenders who will offer you repayment tenor of up to 30 years, such as in the case of Tata Capital Home Loan. But opting for such a long repayment tenor would mean higher interest outflows.
You should ideally opt for the shortest repayment tenor as your financials allow. By repaying the Home Loan quickly, you can lead a debt-free life and enjoy being a homeowner.
Moreover, many lenders levy NIL or minimal charges on Home Loan prepayments. So, you can divert any additional funds or savings that you have towards your Home Loan prepayments. This will reduce the principal outstanding, thereby reducing the interest cost that you will have to serve with the EMI, thus reducing your stress and overall tenor.
4. Get home loan insurance
In India, the problem of under-insurance is notorious as people consider insurance as an expense, whereas in fact, it fetches you like an investment. Make sure that you subscribe to a comprehensive Home Loan insurance policy while availing of the Home Loan. Usually, the lenders will make it mandatory for you to subscribe to a Home Loan insurance policy at the time of sanctioning of the loan. But it is your responsibility to renew it before the scheduled date to enjoy continued protection. It would be advisable to put the Home Loan insurance on auto-renewal.
Having Home Loan insurance in place would protect your family financially and survivors in case of any unfortunate accident leading to your death. The insurance company would reimburse the lender, and your family can continue living in the home.
5. Reduce your liabilities
You should avoid undertaking any unnecessary expenses to maximize your savings to strengthen your finances. As a large part of your salary/ income would be diverted towards Home Loan EMIs, you will otherwise be exposed to financial exigencies. These additional savings will offer you some cushion against these liabilities.
Moreover, if there is a need for additional funds, instead of taking new loans, you can opt for a Home Loan Top-Up. Herein, the lender will offer you additional funds by extending the mortgage against the hypothecated property. You can avail the Home Loan Top-Up to repay all your outstanding high-interest loans and use it to manage your finances in a better way.
As a new or prospective Home Loan borrower, financial discipline is a trait that is much desirable for you. These resolutions will go a long way in helping you achieve the desired results with your Home Loan in an effortless manner.