Get that Dream Home in half the time


Everyone dreams of having a home of their own. Most of the people spend a lifetime earning for a home that they find worth living in. However, the one problem is that home loans always fall as a big burden on our shoulders. If we take a home loan, we need to spend a good amount of money every month as the EMI. This is especially true in today’s scenario where credit has become extremely expensive for customers. If you take a home loan of Rs. 20 lakh for 25 years at yearly interest rate of 10%, you will have to pay nearly Rs. 18,000 per month.

Interest rate and principle repayment

The interest rates are calculated on the outstanding amount of the loan. This way, your first month’s interest will be Rs. 16,666. The rest of the amount is your repayment of the principle. That shows that your amount of principle repayment will increase every month while the interest will reduce accordingly.

Reduce the loan term

To own your home in half the time, you must repay the loan fast. You can contribute extra money every month over and above the EMI to cover the principal amount quickly. It will decrease the amount of interest quickly and will cover your principle repayment in half the time. You may also invest the extra money elsewhere if that gives you higher returns than the EMI. That way you can pay the loan faster using the returns from other investments.

Options for reducing the loan time

There are many options that you can opt for to reduce the loan period. Paying Rs. 5000 extra every month will easily reduce your 25-year loan period to around 15 years. If you can calculate your home finances well, you can definitely manage this extra money every month. If you have a fixed deposit, you can also break that to repay a chunk of the home loan principle amount.

Advantages and disadvantages

Paying an extra amount over and above the EMI has its advantages and disadvantages. The main advantage is that you can do it only while you can manage the extra payments. You can stop paying the extra amount anytime you wish. The only disadvantage is when a bank charges a fee for paying over the EMI or paying off the loan before time. However, not all banks follow this practice. You must find out which banks do and take you decision accordingly.



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