Buying a home is a dream come true for many. Deciding to purchase or build a house of your own is one of the most important decisions in anyone’s life. Many generations of a family can make memories in the same home – when it’s owned by a member of the family. Properties are generational assets that are passed down from father to son. The idea of owning a home is great, sure, but being financially ready to purchase a home is a huge responsibility. Getting a home loan is an equally big responsibility as home loans take a major chunk of your monthly income – for many years (could even be decades).
Several factors come into play while repaying a home loan. While determining the eligibility of a home loan applicant, the lender will consider factors such as net monthly income, credit score, and other liabilities. The home loan amount is sanctioned only to a limit that the applicant can pay conveniently based on the information provided at the time of the loan application.
The factors that are out of control are, loss of job, loss/no profit in business, sudden death in the family, unforeseen expenses, medical expenses, death of the co-borrower, etc. Such things are beyond prediction and control. Hence banks and lending institutions are considerate enough to offer a break in the loan repayment cycle due to unforeseen expenses. The maximum period that you can go without paying EMI dues is six months (the exact terms and conditions for the same vary between lenders). It is important to note that this is only a break and not a waiver of the loan. The loan amount as decided upon loan approval has to be repaid in full.
Home loans are a long-term commitment. To make sure that you pay your home loan EMIs efficiently, you will have to review your home loan periodically. There are three important reasons:
- Check if you can benefit from a home loan balance transfer
Most banks and lenders offer a home loan balance transfer facility. This is offered as a loan product and a person has to go through an application process similar to most other home loans. The main reasons to opt for a home loan balance transfer are –
- Lower interest rate
- Other charges levied for a home loan that is less than the existing home loan plan
- Revised repayment terms
- Better customer support
- Longer loan tenure
- Top-up loan facility at low-interest rates and easy repayment terms
If you find a home loan plan that has one or more of the above-mentioned benefits, it is wise to opt for a home loan balance transfer. However, it is important to note that if a low-interest rate is the only reason you want to transfer your loan to another lender, also consider the other charges that will be levied on the home loan.
Here is a list of charges that you should look out for:
- Processing fee
- Pre-payment penalty
- Late payment charges
- Document retrieval charges
- No-objection certificate
- Administrative charges
- Cash transaction charges for payment of EMI
- Administrative charges
- Foreclose your home loan
If you receive a huge sum of money from the sale of an asset, profit, bonus at work, or appraisal, etc. you can foreclose your home loan. Foreclosing a home loan means paying off the principal outstanding in large part, or in full, to close your home loan account and end your outstanding debt. If you opt for part payment, EMIs in most cases will be recalculated based on the principal outstanding after part payment on foreclosure. If you opt to repay the entire outstanding principal amount, your home loan account will be closed after processing the amount paid.
- Get a home loan top-up
If you have got a home loan for construction or renovation, the expenses will likely go higher than planned at times. When this happens, you don’t have to panic. You can opt for a home loan top-up on your existing home loan plan. Most of the lenders offer top-up loan plans to support the borrowers. After all, it is your dream home and you would want to make it the way you like it.
Reviewing your home loan periodically gives you an idea of the amount of home loan yet to be repaid and the liability that will be added if you get a top-up loan. Consider all the factors while getting a top-up loan. The most important factors are the interest rate, repayment tenure, and repayment capacity based on your current financial health. Repayment is the most important aspect of any loan. We have to make sure we can repay the principal borrowed. Hence, it is wise to restrict borrowing to the limit you can repay – in terms of interest, principal repayment and for the loan tenure, you want to opt.
Now that you know how you can benefit by reviewing a home loan periodically, do you have the feeling of wanting to purchase your own home? Don’t worry about the myriad options in the market. We’ve got your back. Click on the button below and talk to us about what you are looking for.