Reduction of “dream house” interest burden
Home is the place where you can live permanently without worry. It is the place you feel safe to leave your loved ones and go out into the world. But, if you buy a house with a loan, sometimes this becomes a burden on your shoulder. But why should it be so? Do not let your mortgage stress you out.
EMIs- Fixed vs Floating
EMIs or equated monthly installments help you split your interest payment into smaller portions. Now, you do not need to worry about onetime payment of a lump sum amount as your interest. You can split it up on a monthly basis which is much of a relaxation to your pocket. When you choose the option of EMI, you face an eternal dilemma of whether to choose Fixed or Floating EMI option.
Though none come without disadvantages, the floating EMI is a better option to accept when taking into consideration the fact of reduction on the home lone burden. When you opt for a fixed equated monthly installment plan, you are stuck with a higher rate of interest even though the market has undergone a fall in interest rates. But whereas, if you choose the floating equated monthly instalment plan, you can shift the rate of interest you pay according to your needs based on the prevailing market rates.
Prepayment or no prepayment
With cash in hand and a burden of a home loan on the shoulder, a prepayment can be a good plan. A prepayment helps to work out on the heavy interest due and reduce it to a manageable position. When you decide to pay an extra amount of your principal over the interest that you pay helps reduce the burden of tagging along interests into the further future. Paying ahead of time whenever the situation allows you; is a far more intelligent option than to default on the interest in times of need. Whenever you make a prepayment, the outstanding principal is reduced and in turn, reduces the tenure of the remaining loan.
While a home loan prepayment is a gain for the borrower, it is a loss to the provider. So, generally, banks discourage the home loan customer to go for prepayment. But, as life is a zero sum gain, you should always look forward to reducing present burdens.
Securing your prepayment:
· Carry Government issued photo id proof.
· Carry your cheque book.
· Stamped and signed Acknowledgement slip which mentions principal outstanding after prepayment and balances Home Loan tenure or new EMI should not be forgotten.
· At the back of the cheque mention name, mobile number and Home Loan Account.
· As banks can insist on the source of fund for the Home Loan Prepayment, carry the last 6 months bank statement of the account being used for prepaying the sum.
Shifting to another loan
When rates touch the level at which transferring your home loan balance is actually beneficial for you, go for it without hesitation. Only a tiny sum of 0.25 to 1% may be charged by the lender as the processing fee for the shifted loan. As you are a new customer, a small amount of paperwork might be required. Once done, the burden of your home loan interest comes off your shoulders.
Your “dream house” is an assurance to you that your beloved ones are safe under a shelter of their own. Do not let your home loan become a burden on you. Choose judiciously!