Are you looking for a mortgage to buy the house of your dreams? Thankfully, banks quickly offer reasonable mortgage loans once you satisfy their requirements and gather enough cash for a down payment.
But getting a mortgage is not exactly a happy ending. Effectively managing its EMIs (Equated Monthly Instalments) is a chore in and of itself.
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What are the ways to reduce home loan EMIs?
Experts caution against signing a home loan without first making a plan for its repayment. Below are the five expert tips to manage your home loan EMIs easily without any extra effort and avoid debt trap.
Spot Lower Interest Rates
You must monitor the interest rates offered by several banks if you want to manage your EMIs and save money at the same time. Banks offer the option to move your home loan’s unpaid balance to another bank.
If another financial institution offers a better price, you can use this facility as leverage. However, take into account pertinent fees and penalties and only switch banks when the interest rate is noticeably different.
Reconsider Your Terms With the Bank
Yes! You are capable of doing it. Your contract with your bank’s terms and conditions can be renegotiated.
If you and your bank are in agreement, you can renegotiate them and create a new deal. A calculator for EMI is offered by each lender.
You can utilize that EMI calculator to come to a new agreement if your EMIs are too expensive or your interest rate is too high.
Send the bank your updated offer. For example, a modified repayment period. If it doesn’t work out, you might think about transferring your loan balance or taking out a second, low-interest top-up loan to cover the shortfall.
Get Your Finances Together
Effectively managing your instalments basically means managing your money wisely. To improve your overall ability to manage money, you must complete the exercises.
List all of your funds, investments, assets, and liabilities to get started. Find any otherwise investment that could pay you higher interest now.
Savings work in similar ways. You can keep your money in a digital savings account in place of saving through a traditional savings account.
Compared to traditional bank savings accounts, several digital savings accounts offer higher interest rates. They are the ideal illustration of wise investment.
Keep Your EMIs Higher if Possible
Math is easy here. Your loan will be paid off faster if your EMI is larger. Additionally, you pay less interest the sooner your loan is paid off.
Therefore, maintaining larger EMIs means that you pay less interest. Higher EMIs also make you more vigilant and prevent you from taking your monthly payment for granted.
A higher EMI might require some compromises. You might have to temporarily cut back on some of your leisure or luxury spendings, for instance.
But it’s worthwhile since by making this choice, your financial situation will ultimately improve.
Use Windfall Gains for Foreclosure or Partial Prepayment
One of your wise investments paid off handsomely! You received a raise in pay or a sizable reward! Won the lottery – Such events warrant a celebration.
But before you decide to use this money for other investments or a vacation, think about making a prepayment on your mortgage.
Saving interest has received enough discussion in this article. Additionally, a foreclosure relieves you of the responsibility.
If you are no longer required to pay the EMI, you can redirect the funds to another wise investment. Therefore, take advantage of any chance to prepay a mortgage in full or in part.
Conclusion
Although you might not have realized it when you applied for the loan, paying the EMIs can occasionally be difficult.
Your credit score will be negatively impacted if you skip even one EMI. Multiple EMIs missed at once are worse since your home could be seized by the bank.
You shouldn’t worry, though. These 5 financial hints from professionals will make your life a whole lot simpler. Utilize them to avert challenging situations.
Author bio:
Naina Rajgopalan is passionate about numbers and finance. She has been financially savvy from a young age and enjoys sharing her knowledge and advice with others. As a member of the content team for Freo Save, a digital savings account offering up to 7% interest rates and additional benefits, Naina stays updated of the latest developments in the banking and fintech sectors.