The sense of happiness, pride, and security of reading your name on your home’s nameplate can be replaced by none. Home indeed is the most valuable investment you will make. It holds immense emotional significance and promises financial security in uncertain times. Applying for a Loan is the simplest way to finance your home purchase. It makes buying a home affordable.
You can apply for a Home Loan with any leading bank, Non-Banking Financial Company, or Housing Finance Company. Consider the current Home Loan interest rates to choose a suitable lender for applying for a Loan. Being aware of how your Home Loan repayment works is also necessary. Following are important pointers about the same:
Impact of interest rate
As mentioned, the interest rate should be your primary consideration when applying for a Loan. It is the rate at which the lender lends you the principal amount. This interest should be paid over and above your principal amount. You can repay a component of both the principal amount and the interest liability with every Equated Monthly Instalment. A higher principal amount and interest rate translates to a higher EMI payable and vice-versa.
The Home Loan interest rate differs for every lender. It is also based on other factors primarily your income and credit score. Explore the market to find the best interest rate. Build a solid financial profile and improve your credit score to obtain a better interest rate.
Understanding the amortisation schedule
Your EMI payable is spread across your repayment tenure. A longer tenure indicates a lower EMI amount, but a higher interest liability and vice-versa. As and when you make EMI payments, your principal amount gets repaid. Typically, considering this you pay higher interest in the initial phase of your tenure, which then gradually decreases. Amortisation schedule is a schedule detailing your EMI payments.
It mentions the timeline and amount payable. This gives you a clear idea of how your repayment works. You become aware of the principal amount and interest component you cover with every EMI.
Pre-payments and foreclosure
Pre-payments means repaying your Loan before time. You generally make a significant partial pre-payment. It’s a great way to reduce your Home Loan interest liability and repay your Loan faster. Foreclosure means clearing your Loan for once and all. You do this by making a one-time lump sum payment instead of repaying it in EMIs. This frees you from the burden of repayment early on.
Note, your lender may charge you a fee to avail pre-payment and foreclosure facilities. Some lenders may extend this facility free of charge. Either way, you should opt for them as there is no better feeling than having all your Loans cleared.
Sign in to leave a comment.