The foremost advantage of closing your home loan before time is clear – you are liberated of EMIs, which are perhaps the biggest persistent debt currently, hurting your monthly income. In this post of loan guide in Delhi NCR I will discuss about closing home loan early.
In the past, the penalty in prepaying a home loan was a key restraint, but banks cannot impose such a fine. Assuming that getting free of this monthly load is vital for you than the tax advantages of availing home loan, you have to start finance planning.
Most will also have been servicing a home loan for at least 4-5 years. It has to be remembered that banks structure home loans in such manner that they obtain the largest part of the chargeable interest in the first few years of the loan tenure. Also, this is the period in which one should already be planning financially towards one’s retirement.
Anyway no matter how financially safe you are, the first step is always the creation of a safety net. Paying off a home loan always needs a considerable corpus of accounted-for cash. If you use all your available cash to close the loan, you will be left with nothing for unanticipated contingencies.
In case you have to find a new job, you should have around 6 to 8 months’ worth of salary in saving. Defend yourself against the expenses of medical crisis, availing medical insurance with a cover of about 10 to 15 lakhs for your entire family.
With the monetary safety net in place, next step is to build the corpus close the loan early. Begin by investigating closely at all the methods in which you are losing money every month. Get a no-frills credit card with a practical credit limit and cancel the others.
The savings on interest rates will make a major difference. Likewise, pay out your personal loans and sell off or cease money-draining if you don’t use them frequently. Many people believe that the best way to save up for paying out their home loans is to amass money in FD or savings accounts. The reality is that the meagre interest you earn in a savings account does not even hit inflation, so you really lose money by stashing it there.
Instead, move most of your income to liquid fund, which will give you higher interest, you get better interest than the savings accounts, and you still get complete access to your money whenever you want it.
If you follow these directives, you will see that you can reach the point at which you can pay out your home loan every time you wish much sooner. It calls for restraint and planning, but it also brings you much nearer to the day on which your bank hands you the possession papers of your completely paid-up house.
I hope this post will help you in understanding the advantages of closing home loan better and clears your doubts.