Home Loan! Smart Tips to Handle
Sep 01, 2016 Home Loan
There is no shortcut to handle the home loan. Financial cycle or opportunities definitely are the path. One could seek a reduction in EMI or increase the EMI to close the loan early.
To find smarter ways one must understand the basics.
What are Refinance, Restructuring and Balance Transfer?
Refinance: If you need additional money against your current home loan, it is called refinance. It works like a top-up. It is much better than any other indiscreet personal loan. You have the advantage of getting this loan with lower interest rate, lower EMI and also have the flexibility to pay back.
Restructure: It’s a process where you alter your EMI (either increase of decrease) keeping the loan amount same. Here you adjust the loan tenor either by reducing the EMI or increasing it to close the loan quicker).
Balance Transfer: If you wish to move your home loan from one bank to another bank, it’s called balance transfer. You may do it if you are getting any benefit such as lower interest rate.
Quick Cheat Sheet
To find smarter ways one must understand the basics.
What are Refinance, Restructuring and Balance Transfer?
Refinance: If you need additional money against your current home loan, it is called refinance. It works like a top-up. It is much better than any other indiscreet personal loan. You have the advantage of getting this loan with lower interest rate, lower EMI and also have the flexibility to pay back.
Restructure: It’s a process where you alter your EMI (either increase of decrease) keeping the loan amount same. Here you adjust the loan tenor either by reducing the EMI or increasing it to close the loan quicker).
Balance Transfer: If you wish to move your home loan from one bank to another bank, it’s called balance transfer. You may do it if you are getting any benefit such as lower interest rate.
Quick Cheat Sheet
- If you can, pay a higher EMI. That helps in closing off the loan account prior to the loan period.
- Manage your funds to maximise cash flow. If you do a calculation of the amount of home loan you pay and the returns you get, you can opt for better investments.
- Try partial pre-payment. It’s a quicker way to drop your loan period and reduce the loan obligation. Usually, maximum banks do not charge any fee for the service.
- Use mortgage calculator that will help you understand the sustenance amount of home loan.
- Do not delay or miss your monthly payments. If you skip your monthly EMI, it will ultimately pull out the excessive cash from your secured budget. It also affects your credit score.
- Your first step should be to make a clearer goal. What’s your requirement? Is it the requirement larger amount or reduction in EMI? Do you want to reduce the interest rate or do you want to close the loan quicker or a combination of all these? If your goals are clear, it will be easier to choose the path. Two things that must be taken care of:
- You must review your home loan and know about your current home loan interest rate. This is in case you have chosen floating rate option while purchasing and availing the home loan. Floating rate is one that interest rates keep changing.).
- You need to know the current home loan interest rate for any new home loan. The probability that your current loan rate is higher than the new loan rate is less.
Here, if you see that the difference in the interest rate is higher that the processing fee that you require to forfeit for the new loan, it is advisable to change the home loan from your bank to the other Bank. You need to be cautious while evaluating the total price including the loan registration.
Everyone must be aware of all the options of home loan available in the market.
Everyone must be aware of all the options of home loan available in the market.
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