Reducing your home loan EMI burden is not as difficult as it may seem. Here are a few methods to reduce your monthly payments without having to relocate or downsize.
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You should start by assessing your current financial situation and making a budget. This will help you figure out where you stand financially every month. As you will soon find out, creating a budget has many benefits. This way, every penny will be accounted for and reduces the risk of spending beyond your means.
Budgeting your expenses is essential to reduce your home loan EMI burden. A proper home loan EMI calculation depends on all types of monthly expenses, including food, fuel, utility bills, medical expenses, travel, and more. Once you have correctly allocated your income to all your expenditures, you can begin reducing certain costs that are not necessary.
One of the best methods to reduce the monthly home loan EMI burden is by keeping your expenses under 30% of your take-home pay. This works on the principle of creating a surplus within a 30% limit and then saving it in a bank account for future expenses.
You can also make full use of investment opportunities. Investment opportunities will help you save tax efficiently by offering tax deductions under section 80C. Since the interest on the VA homes for sale is also tax-deductible, be sure to keep it within a 50% limit. If you’re already paying a higher interest rate than the one that qualifies for the deduction, then it would be best to refinance your home loan into a lower interest rate plan.
A savings account ensures that you are financially sound even if your take-home salary has been reduced or there was a reduction in your income due to unemployment. You can open up multiple savings accounts for emergencies so that you have enough money saved up to handle the expenses.
Remember, keeping small sums of cash will help you save on ATM fees as well. This is a great way to reduce the monthly home loan EMI burden.
To reduce your monthly home loan EMI, then opting for a longer repayment tenure will help you do that without compromising the total amount you pay throughout the plan term. For instance, if you plan to repay the home loan within 20 years, you will end up paying more than someone who planned on repaying it in 15 years.
However, if your total interest outgo is lesser over a longer tenure of repayment, considering the overall EMI amount will help you reduce your monthly home loan EMI burden. If you took a home loan at a lower interest rate, this is possible. This will decrease your EMI and allow you to pay back the entire amount faster/cheaper by keeping your monthly installments low.
Keep in mind that getting into debt for reducing your monthly payments might be counterproductive in the long run. Hence, if you can reduce your expenses, you should do that instead of creating a debt situation.
If your monthly income is enough to repay a higher loan amount in a lesser tenure while keeping the overall EMI payment low, consider opting for a smaller home loan amount. This will ensure a quicker repayment and a low EMI. However, you should ensure that you are not compromising on quality when choosing to save on the home loan amount by settling for a lesser variant in your preferred location.
If you’ve got an option to refinance your home loan, consider doing that. Refinancing helps you get a lower interest rate, which means lesser monthly EMI payments. You can compare rates between multiple banks and take advantage of any special schemes.
Once this process is complete, if there are still opportunities for you to save up on monthly installments, it is best to opt for a repayment plan opposite your existing one. This would mean choosing a longer tenure of repaying the loan or extending the repayment frequency.
To reduce your monthly home loan EMI, you need a repayment plan that lets you pay the least amount over time. Look around for more options available to you, and do not settle on an opportunity just because it offers some immediate relief in terms of lower monthly installments. While this might help, it can hamper your financial progress in the long run.