Repayment Of Home Loan: Owning a home is a universal aspiration, whether you’re an employee or a business owner. People seek home loans not only for buying houses or flats but also for plots, construction, or repairs.
Generally, home loan eligibility depends on your income, with banks typically offering loans covering 80 to 90 percent of the property’s cost. Additionally, your ability to manage the home loan’s Equated Monthly Installments (EMIs) plays a crucial role. Financial expert Jitendra Solanki advises that banks assess whether you can allocate 40-50 percent of your monthly income to the home loan EMI. While home loans offer accessibility, repaying them carries both responsibility and burden. Here’s how to expedite the repayment process:
Opt for a shorter home loan tenure, even though it results in higher EMIs. Assess your financial situation, advantages, disadvantages, and necessary expenses before making a decision.
Whenever your income increases, consider increasing your EMI to reduce the loan term. Additionally, making occasional prepayments reduces your outstanding loan amount and shortens the repayment period.
Another effective strategy is to transfer your home loan to a bank or lender offering a lower interest rate. Balance transfers should be pursued if they alleviate your financial burden.
If you find it challenging to pay your installments, consider the following:
Approach your loan giving bank as soon as the first installment bounces. The manager may advise careful payment of subsequent installments or allow you to temporarily suspend payments.
Remember that EMI payments can be made either in advance (beginning of the month) or arrear (end of the month).
To make your home loan journey more manageable:
Consider restructuring your loan when your income significantly exceeds your expenses. Increasing the EMI can help reduce the repayment period and minimize interest payments.
Budget your expenses to save money, and allocate the savings to increasing your EMI payments by 5-10%, which reduces the loan term and overall interest costs.
Utilize your annual bonus or incentives to make prepayments, lowering your outstanding amount and EMI.
Now, let’s address the documents and precautions for home loans:
Required Documents for Home Loans:
A checklist of required documents is provided in the home loan application form, along with a photograph of yourself.
You’ll need legal documents related to the property purchase, along with identity and residence proof, salary slips, Form 16 or income tax returns, and bank statements from the last six months. Some lenders may also request life insurance policies, share documents, NSCs, mutual fund units, bank deposits, or other investment documents as collateral.
Can You Close a Home Loan Prematurely?
Yes, you can close your home loan before the initially agreed-upon tenure. If you have a floating interest rate, there might be no charges, while fixed-rate banks may impose fees.
Remember, when considering a home loan, don’t set the EMI so high that it becomes challenging to repay. According to financial expert Jitendra Solanki, your home loan’s EMI should not exceed 35-40 percent of your take-home income.”