Do You Know The Best Repayment Strategy For Home Loans?

When most borrowers are asked this question, they typically resort to clichés. They think their repayment strategy is saving. Some say that it is budgeting monthly expenses well. Either way, very few borrowers have a concrete plan to actually repay the loan consistently. It may surprise you, but this is the toughest and most important part of the home loan. It is more important than home loan interest rates too. Home loan rates can go up and down. But, you cannot get out of home loan EMIs till you completely pay the principal amount and the interest. So, here is what you need to do to organize the most suitable repayment strategy.

Build financially savvy habits

Most housing loan borrowers believe that they will make the repayments once they get their housing loan. But, it is more complex than that. You will need to set some funds aside for a down payment too. You will also need to pay for few additional expenses as per your home loan package. For example, home loan protection plan, credit score report, credit repair expenses, etc. So, when you plan to buy a property with a house loan, you are looking at making dedicated payment every month for next 15 to 30 years. So, you must start building financially smart habits. It will help you increase your assets and lower your debts and expenditures. There is no alternative to that.

Know how much funds you need

Most borrowers know their house loan EMI. But, very few people know their net worth. For most salaried individuals, it is the number of months and years you can survive without your current active income. Home loan EMI and utility bills are a crucial part of survival. They are invariably the biggest monthly expenses. So, you need to set some funds aside in a fixed deposit or a recurring deposit as a nest egg. You need to be ready for any kind of financial or medical emergency that may cut off the supply for your active income. Most borrowers cannot gather enough funds to repay it for few months too. That’s why they get into a bigger trouble. That’s why your repayment strategy should ensure that you save enough for 6 to 12 months. In most cases, you will get sufficient opportunity to recover from any financial or medical challenge within this duration.

The best repayment strategy should help you reduce expenses without compromising fundamental quality of life. That is the tough part and a true art. But, you should focus on minimizing the expenses that do not matter to you so much. For example, transportation, leisure, entertainment, etc. So, make smart decisions and your repayment support system will be ready in no time.