Easy Ways To Repay Your Home Loan

Easy Ways To Repay Your Home Loan

Having a perfect home can really be a dream for everyone. And making your dream home a reality is easier with the help of a Home Loan. To some people, the word loan can be a bit scary but it’s not if you try planning your Home Loan. A perfect home can only be achieved when there is perfect planning. It’s important to invest your time and efforts in order to have perfect Home Loans.

While going for a Home Loan you must consider the following things:

  • Interest rates:

Interest rates are the most important thing to consider when it comes to Home Loans. Interest rates vary from banks to banks. Banks charge rate of interest depending upon the loan amount you borrow and also on loan tenure.

Credit scores are a thing that affects your interest rates. Having a good credit score history can benefit you with low-interest rates. Banks offer you low-interest rates if you have a good credit score history and the loan process is also much faster. Having a bad credit score can totally be opposite as you may face difficulty in the approval of the loan as well as you may have to pay a higher rate of interest.

Easy Ways To Repay Your Home Loan

Due to the demonetization drive, the interest rates have been gone down and so this can be the best time to opt for a Home Loan. The government has brought down the interest rates by 4% for about 9 lakh and 3% for up to 12 lakh loan amount for a loan in an urban area. Whereas, the interest rate in the rural area has been lowered by 3% for a loan up to 2 lakh. So repaying a loan has got easy as the interest rates have gone low.

  • Loan tenure:

Many-a-times people keep on repaying their loan and its interest rates for years which should not be the case when it comes to Home Loan repayment. Also, it should not be either way around where you pay heavy interest for a short period. A 15-year mortgage can be perfect when it comes to Home Loan repayment.

Now, what exactly is 15-year mortgage planning? Here you have to pay the same interest rate and EMI for 15 years. This includes both principal and the interest. The best way here would be to refinance your loan as this can destroy the debts faster and also have a lower rate of interest. If you own another house then renting that and using the funds to repay your Home Loan amount can work well. You can easily use the rent of the first house to repay your EMIs as this can be more easy and convenient.

  • Tax benefits:

Suppose you have a loan worth INR 55 lakhs, and you pay a monthly EMI of INR 42,000 which you could split in two: interest component and principal component. At first, the interest component is higher whereas at the end principal component is higher. Now if you take a look at the banks’ loan statement you will get that, that in the first year, the interest component will be approximately INR 30, 000 per month while the principal component will be INR 12, 000 per month. This tells us that a principal repayment can be claimed of INR 1, 44,000 under Section 80C.

Here you need to remember that the behavior of principal remains the same despite the property being self-occupied or rented. If the property is sold within the period of five years then funds benefited by Section 80C will be treated as taxable income.

You should thus remember these points while loan repayment.