Now that you have a home loan in kitty, you need to become a financial disciplinarian. EMIs are not scary but they are a responsibility that you need to consider seriously enough to plan the way you handle money and also plan your expenses. When taking a home loan, affordability and flexibility are primary concerns. However, once you sign on the dotted line of a loan agreement, there is no looking back. The only way is forward and knowing a few tricks or tips here and there will help you handle home loan like a pro.
Rainy Day Fund
- The importance of having a rainy day fund or even a contingency fund is often discussed. Around you, there might be so many events or occasions that you can never predict. Bad times strike and you need to accept the same and plan rightly.
- There could be sickness, job losses, pay cuts and even a pandemic—there can be so much around that will change with the way you handle money. In such times, your EMI still needs to run smoothly. Therefore, you must be prepared with a fund for contingencies for at least five months to sail you through, even if you have a home loan or don’t.
Windfalls work Well
- Whenever you have a windfall gain, go ahead and reinvest the money into paying off part of your loan. This is vital to reduce the interest burden your loan comes with. Additionally, you get to enjoy ease of mind by not having wasted the windfall gain on some purchase you do not actually need. Check out the home loan eligibility well ahead with a home loan online calculator and offers.
- It might seem tempting to go in for a new buy or a luxury splurge when you have bonus funds. However, if you have a home loan tied up to your name, the cleverer thing to do is bring down the EMI burden.
Target Principal Reduction
- Always target that you try paying off the loan with part payments in lump sums. Bringing down the principal lessens the EMI burden. It might bring down the tenure of your home loan. During the early stage of a home loan, you stand best fitted to pay off the steep principal amount. Partial prepayments are not even subject to interest or penalties. That gives you an additional advantage. You need to plan these pre payments in an orderly manner after you understand the process from your bank.
- When planning your finances, you need to set up an account for saving up funds for your EMI on the home loan. Your investments and policies on maturity can yield you good returns. You can simply redirect these savings into a specific EMI fund.
- Even if you do not go in for hurried prepayment, you can save up separately to not mix up your expenses. Check out for dormant accounts or low return policies that are not performing as anticipated. Pull out such funds, investments, and roll these back into your EMI account.
- You might even go in for shorter plans for investments that are safe. So many instruments around the market have good yields despite being low risk. You can easily tap such sources for investment with any extra money you have. Essentially, over a short span, these arrive back all bagged up with favourable returns. Use these to build an EMI fund. When you know you fulfil all home loan eligibility criteria, get one at the right home loan interest rate without delay.
Make use of home loan calculators and expenses log applications to track how much EMI you can comfortably bear at the most stretched rate. Plan a home loan by checking up plans on home loans online. Once you are aware of your home loan eligibility, calculate an estimated EMI using the relevant home loan eligibility.