A mortgage is a long-term commitment, as it can take up to 30 years to pay back. This loan will help you to own a home with tax benefits; however, this also affects your current and future finances. Therefore, you should repay the loan as soon as possible by carefully managing related factors such as repayment term and monthly installments. If you are considering insuring your existing home loan, here are some tips that can help you manage it wisely.
The term is an important factor to consider when planning your mortgage closing early. You can opt for the shortest possible term so that you can repay your loan quickly. However, this would also mean paying a higher repayment amount as occupancy has a direct impact on the EMI of your home loan (equal monthly payments). The term is shorter, the EMI higher, and vice versa.
Therefore, do a good assessment of your financial situation before choosing the loan term so that you can withdraw the IMEs without affecting your lifestyle or other financial goals. A longer-term means lower IMEs, so you can pay off the loan more conveniently without putting too much pressure on your finances. However, a longer-term also leads to higher interest expenses, as you pay the interest amount for a longer period of time.
Use the EMI Mortgage Calculator for an EMI to pay. This online tool instantly calculates EMI based on the interest rate, loan term, and loan amount information.
Of all the types of loans available on the market, a home loan has the longest repayment period. The Oriental Bank of Commerce home loan offers a maximum loan term of 40 years. Over such a long period of time, a borrower’s income is expected to increase, especially among salaried employees. If you work or have a job where you expect your income to increase over time, try gradually increasing the EMI on your mortgage. Paying your mortgage upfront through a higher EMI would lower your outstanding loan amount.
The occasional early payment on your mortgage is a quick way to reduce your debt as it will shorten the life of your loan. In addition, clients can enjoy significant savings on their full interest payments. Previously, lenders charged a partial down payment and foreclosure on home loans with variable interest rates. However, according to RBI guidelines, banks, NBFC and HFC cannot impose these sanctions.
The Home Loan Balance Transfer (HLBT) is another way to close your mortgage early by transferring the outstanding loan amount to another lender with a lower interest rate.
Rolling over your mortgage balance in the first few years of the loan can save you significant interest payments. In doing so, you should avoid extending the term of your loan. In this way, borrowers typically pay most of the interest component in the first few years of their loan, so a transfer of the mortgage balance will not generate large savings when you reapply for a mandate higher. If you limit the new tenure to the remaining term of the existing home loan, you will not be able to pay additional interest.
However, if you are in financial difficulty, you should consider extending the loan term as this will reduce the burden on EMI. And you always have the option to pay in advance as long as there is disposable income from your labor premium, hike, and some kind of business benefit or investment. Therefore, choose to roll over your mortgage balance only if you save significant amounts or reduce your financial burden.