5 Things You Must Know About Loan Against Property Calculator
In India, having home ownership is a big achievement. People celebrate the occasion, as it marks your growth and success. However, owning a home is more challenging than it seems.
With real-estate prices soaring, it is almost impossible for people to own a house without financial aid. Opting for a home loan is a viable option in this case. However, if you have a property you can mortgage, you can also avail of the funding by exploiting the loan against the property scheme.
However, before applying for a loan, you must understand the home loan eligibility and functioning of a loan against a property calculator to comprehend the financial stakes of taking a loan. Loans against property are a long-term commitment of 15-30 years.
The longer the term, the higher the interest. So, you need to make a smart choice about your loan term to ensure financial flexibility. To help you make a sound decision about the same, we have put together some smart solutions to help you reduce the cost burden on loan repayment. Read them below.
1. Increase the Frequency of Loan Payments
Typically, for a mortgage loan, the repayment tenure starts from 10 years, which may go up to 30 years, depending upon the lender and borrower’s intent.
When applying for a loan, you must know that the longer repayment term will compound interest over the years. Consequently, you may pay more interest than the actual loan amount. Therefore, it is recommended to have a shorter loan tenure to avoid paying too much interest.
However, short-term loans mean increased EMIs; thus, you must thoroughly evaluate your budget to make a smart decision concerning the loan tenure. You may use the loan against the property calculator to calculate the tenure and associated EMI that matches your monthly budget.
2. Make a 20% Down-Payment
When purchasing a house, you need to make a down payment, which may range between 5% to 15% of the property value. It is the minimum down payment that financial institutions expect you to pay.
However, to ensure cost savings on loan repayment, you must strive to make a down payment of 20% or more. The underlying reason is that a higher down payment will lower your debt obligation. Resultantly, the repayment tenure of the loan will reduce.
3. Choose High Monthly Instalments
The higher the monthly instalments lower will be the loan tenure and the associated interest value. Consequently, to reduce the interest, you can choose to pay high monthly instalments. Use the loan against property calculator to calculate the EMI that pays off your debt in less time without creating a financial burden.
4. Choose Short-Term Mortgage Options
A short-term mortgage has a maturity period of ten years as compared to other mortgage options that expand over 15-30 years. The benefit of this option is that you can pay off your debt in a short time.
However, the monthly instalments are usually high as the payment term is low. Notably, the interest rates on such loans are low, implying you can save a lot by choosing this option.
You should opt for this option if you can pay higher monthly instalments. This short-term mortgage will facilitate quick ownership of the house and induce interest savings.
5. Use Extra Earnings to Make Part Payments on Property Loan
If you have any extra earnings at any time of the year, you must use it towards paying the loan. The earnings may be in the form of income tax returns, seasonal bonuses, or any other unexpected gains.
Since this is an extra amount, it does not influence your budget, so use it to pay the loan. However, ensure you know your lender’s part-payment and pre-payment charges to avoid paying any extra processing fee for ad-hoc payments. Smartly avail of this option to lower your debt obligations.
Conclusive Note
A loan against property is a secured loan, which allows the lender to keep the property as collateral. It is a popular lending option facilitating long-term loans at reasonable interest rates.
However, the long-term payments compound interest over the years, which increases the overall loan amount. The article, therefore, recommends various options to lower this interest burden.These include increasing the frequency of your loan payments and trying to pay higher instalments. You may use the loan against property calculator to calculate the most feasible EMI option to lower your debt obligations.