Home Loan Repayment Options You Must Consider

Repaying a home loan shouldn’t make you fret at the end of every month, as nowadays repaying the loan on your dream home has become much simpler. A thing to keep in mind while repaying your loans is that EMI will be smaller if you pay your home loan for a longer period of time.

Most home loans takers use the conventional EMI option where a fixed amount is paid every month. In this option, the principal payment is quite high and the amount towards interest is comparatively low, which results in a higher EMI. Since the deducted amount is uniform, customers can plan their monthly payments using EMI calculators for home loans.

There are some payment options available that can be customised according to a person’s financials, age, type of property, credit history and so on and so forth. Some of them include:

Step up repayment facility (SURF)

This repayment system is directly connected to the borrower’s monetary growth where it allows a customer to pay lower EMIs in the initial years, which gradually increases in successive years, subsequent to an increase in the customer’s annual income.

Step down repayment facility

This is structured in such a way so as to decrease the EMI amount as the loan gradually progresses. This repayment plan is best suited for those who are close to retirement, since they would be unable to pay high EMIs once there is a considerable fall in their income. Thus, they can pay off high EMI amounts when they are still employed and ease financial pressure post-retirement.

Tranche based EMI

It allows customers to decide the amount of EMIs they want to pay until the construction of property is complete, since this facility is offered for loans taken on under construction properties. It is very advantageous since the customer can pay off EMIs earlier and therefore repay the loan even sooner.

Accelerated repayment scheme

This allows customers with an opportunity to pay off their loans faster by increasing their EMI amount. This scheme is used when the borrower has a lump sum or an increment in his disposable income that he would like to spend towards repaying the loan faster. It is therefore imperative to make sure that your calculations are accurate and that you do not fall back on your monthly payments by utilising the EMI calculators for home loans.

Balloon payment

This scheme is advised only for those who are extremely financially sound and should be avoided as such customers pay far more interest as compared to other loan schemes. They involve lump sum payments at pre-determined intervals or at the last stages of a home loan.