SMART SOCHO- 5 Smart Tips to Manage Your Home Loan

Managing your home loan can be a tough ask for many, pre-payment an impossible dream for most. Yet it doesn’t necessarily have to be so. Smart planning and deft lifestyle changes are all it takes to pay off your mortgage and truly own that roof over your head.

While buying your first home leaves most of us with this incredible feeling of pure joy, pride and great accomplishment – often all rolled into one, the thought of forking out a hefty amount out of your hard-earned paycheck every month towards payment of your home loan EMIs, is known to leave a bitter after taste.

And just as you grudgingly sign the cheque the realization sets in that it’s going to be your regular monthly ritual for the next 15-20 years (depending on your loan tenure). Pretty soon the feeling of utter joy you felt not so long ago has turned into a feeling utter despair.

A quick mental calculation further reveals that by the time you have paid in full, the best years of your life- your youth – could well be behind you, with the first signs of grey already making their presence felt.

It’s a scary scenario that most of us, atleast those who have bought a home via the home loan route – can easily identify with. But to the surprise of many, it doesn’t have to be so always. There are ways and means to ensure that you become loan-free well before the tenure ends… and your grays begin.

With the RBI doing away with the pre-payment penalty clause for home loans, all it takes now is a bit of smart planning, cost-cutting and intelligent living to buy your home and pay off the loan too…before time.

Listed below are a few handy tips and guidelines that may convince you that the prepayment of your mortgage may not be such an impossible feat after all.

Relook at Your Financial Health:
Take a step back and take a long look at all your investments till date. Are your investments into mutual funds, debt instruments, and bank fixed deposits and so on yielding the desired level of returns in terms of your mid-to-long term financial goals?

If the answer to that question is yes, then you could safely direct all your available surplus funds towards finalizing a plan to prepay your home loan. The key is to ensure doing this without compromising on your financial goals or your existing lifestyle.

Think about Making Partial Payments:
Once you have ensured that you are well-placed on the investments front, it’s time to start thinking in terms of making part payments to service your home loan. It’s a facility allowed by most large banks while others may allow a fixed number of pre-payments per year. Annual bonuses, salary arrears, cash gifts received from family & relatives or even a performance-linked bonus from your company make for convenient cash reserves to dip into, to make these payments.
 
Cut Your Expenses:
Living within your means and cutting out all unnecessary expenses (like buying that swanky new large screen LED TV) forms an important preparation in the journey to be debt free. Condition your mind to let go of those expensive gadgets or that foreign vacation, channel those funds into servicing you loan instead. The going will be tough initially (especially making the family understand your point of view) but in the long run nothing gives more joy than owning the roof over your head.

Opt for A higher EMI:
This doesn’t necessarily have to be by a large amount; even a small increase of say a few thousands can go a long way towards repaying atleast the principal amount. The golden rule of servicing any loan is that the lower you bring your principal, the lower interest you have to bear. Hence do give this one some thought, remember every extra rupee that you channel into your monthly EMIs will go a long way in reducing your loan tenure substantially.

Look At BT Options:
With competition among banks growing for a larger piece of the home loan pie, several banks also offer home loan customers the option of a balance loan transfer. What this means is that a customer has the option of transferring the unpaid portion of his home loan to another bank that is ready to offer him a better deal at a lower rate of interest. Thus makes for a profitable proposition simply because even a marginal 0.25 percent difference in the rate of interest can make a huge difference in the monthly EMIs borne by the customer as also the tenure of the loan.  

Family Support is Key:
While the burden of paying the home loan has to be borne by an individual, it’s practically impossible to do so without the complete and unconditional support of the family. You might not be able to involve them in the pre-payment process or arranging the funds, but they can prove to be an indispensable ally in helping and supporting your endeavour to save money by cutting down non-priority expenses.

For example, suggesting a nearby place to visit during holidays instead of that expensive overseas trip can help save you a huge amount of cash without really compromising on their enjoyment.

By implementing these simple suggestions and getting your family involved, it is quite possible to save the money needed to pre-pay that pesky home loan without getting stressed out. It’s only after paying the home loan in full that one becomes the true owner of the property and that feeling itself is enough to make the journey (to get there) well worth the effort.