Home loans are the tools which help people purchase homes of their dreams especially when the amounts involved are beyond their financial reach at the time of purchase. Due to the availability of housing loan, the realty sector has become an important industry in India. Today it contributes to more than 10% of the GDP and is one of the prime industries that the government has marked for development.
However when one takes a home loan, a person becomes bound to a financial liability for many years. The loan EMIs are set to ensure that the bank receives the principal along with an interest that makes its investment a viable one. The facility also helps a person pay in part and yet enjoy the luxury of owning one’s own home. To ensure that this arrangement remains in place it is important to service home loans right. The following tips would help a home owner breeze through a home loan.
Payment on time
The prime requirement of servicing a property loan is to make all required payments on time. In case a person has opted for a floating rate, the amount of payments would vary from time to time. But this does not entail that the payments can be made at different times. The banks expect that a person pays every installment on a pre-established date. One should not pay too early or too late. In both cases, the payment trends show an aberration. The payments should be made at a regular interval of 30 days on an average. Payment on or at a date before the predefined date help one ensure that timely payments are made.
Making a higher EMI payment
Even though the bank may not demand it, making a payment higher than the EMI amount helps in shaving off the accumulated interest. This helps in reducing the principal amount and therefore the overall interest payment is reduced. The home loan eligibility amount of housing.com shows a range of EMI payments that a person is eligible for. One could use it as a yardstick measure and ensure that the payments are higher than the interest rates to see a quick visible change in the home loan plan.
Making large payments
The third method of reducing a home loan liability and closing the home loan early is to make large payments whenever possible. It is advised that any windfall gains received can be paid into the home loan account. The consequences are not seen immediately. There is no reduction in the EMIs or the interest rate. However the extra amount goes off in reducing the interest (as in the case earlier) and hence reduces the principle quicker towards the last leg of the loan.
When one makes timely payments for a number of years, there are numerous benefits that a home owner becomes eligible for. One of them is to revise a plan. This is helpful particularly after making a substantial payment in the account. Plan revisions help increasing time limit or reducing EMIs.
Loan account transfers
This is another feature which a home owner becomes eligible for after making timely payments for a few years. Loan account transfer allows switching banks for better home loans.