Mr. Kumar had recently purchased a 3 BHK flat in the Shaguna More area of Patna. The flat cost him around Rs.60 Lakhs including taxes. Besides saving, he had to take a home loan of Rs.45lakh. Now the biggest burden he faces every month is the EMI which takes away 35% of his monthly salary. With the ever fluctuating interest rates, home buyers in Patna like Mr. Kumar are having second thoughts on purchasing homes in Patna.
To keep EMIs affordable and also purchase the dream house in Patna, people usually go for long tenure home loans. However, many are clueless that the more long-term loan you apply for, the more interest you pay.
As mentioned above, the long-term loan will make you pay extra EMI from the usual interest rate you are paying. The short-term loan will ensure reduced long-term financial commitment. A 15-year loan is quite affordable compared to 20-year home loan, which will also result in the lower interest rate. Moreover, the principal amount paid is fast leading to a lower interest rate.
A second way is to increase your EMI by certain % every year. You can increase your EMI payment rate yearly as your salary and other saving options increases. For instance, your salary increases by 10% per annum; you can increase the payment interest by 5 %. This will also help to repay your EMI within few years, rather stretching it for too long.
And one of the best way to reduce the EMI rate is by paying the principal as quickly because lesser principal amount, lesser will be the interest rate. If you are carrying extra cash with you, then give it to the bank to get your principal amount reduced.
Therefore if you are feeling the heat of EMI monthly these are some ways to ward of the evil in the near future.