13 Ways To Manage Your Housing Finances Better
AdvertisementThe relationship between income and affordability for various income groups follows a nonlinear trend. Owning a house means investing a substantial amount of money – probably the single largest investment made by any person aspiring to purchase a house. It is obvious that many people may not have the means to buy a house and may have to look out for possible
Earlier the gap between middle-class income and cost of houses was huge, which made buying a house near to impossible. But during the last decade, the gap between the income level and the housing cost has come down significantly and more people are now interested in acquiring properties. That’s why there is increasing demand for middle-income housing. Moreover,
1) Avoid incurring more debts that you can handle. Since a mortgage loan involves a huge sum and a longer repayment period, it is crucial to take your repayment obligation seriously. Always remember that your home – your most important property – is at stake. Avoid applying for other loans that can be an additional burden. Keep your credit card spending in check. Whenever possible, try to pay more for your mortgage. The sooner you can complete your payments, the better.
2) Arrange a fixed
3) Consider getting a debt consolidation loan. If you are managing two or more types of loans, consider consolidating your debts for easier repayment. Consolidating or ‘merging’ your debts into a single loan can significantly lower the interest rate you are paying.
4) Consider refinancing your loan. If you are in
5) Make a lump sum payment. If your finances allow you to pay your mortgage completely, do so. This way, you can be secure about your investment.
6) Put in a large payment on your loan whenever possible. Instead of paying just the minimum due, try to pay more of your mortgage to cut down your balance more quickly.
7) Don’t go for a loan just because it offers a very low rate. Do not sign up for a home loan just because it is offering a low interest rate. Keep in mind that a variable-rate loan is bound to change at any time during your repayment term. Half-way through your loan term, you may find that you are stuck with balloon payments, which can make repayment very difficult.
8) Obtain a loan that gives you more options and flexibility. Look for a mortgage lender that offers flexible repayment options. Make sure that modification of your loan’s term is possible just in case anything unexpected takes place (for example,
9) Go for a long-term mortgage. A home loan with a fixed interest rate and a reasonable repayment period will be less of a burden than a short-term loan with variable interest.
10) Save for down payment. Submitting a higher down payment can reduce your loan interest rate by 20-25%. Therefore, prepare your down payment prior to acquiring a mortgage loan.
11) List of savings/investments. Make a list of all the loans and savings/investments that you have made. Do you find instances where the savings/investments are giving lesser returns than the loan rates? This can typically be seen in endowment
12) There are ways to come out of the
1. Partial pre-payment
2. Switching to a lower rate
Advertisement3. Increasing the EMI
Now let us look at these options in more detail. The best part is – these options do not, in any way, add to your existing budget.
13) Partial pre-payment. This is the easiest way to close a housing loan faster. The method is to make use of any one-time income such as bonus, salary arrears, gifts from friends/relatives, any windfall from the
These one-time payments help reduce the principal balance in the loan. And when the EMIs continue, they have to cover less principal.
So the same EMIs require less time to close the loan. The earlier and more frequently these partial pre-payments happen, the faster you can close the loans.
AdvertisementThe author Brijesh Parnami is the CEO, Distribution at Destimoney.
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