Purchasing a home has never been a simple task, but the simple availability of home loans by distinct financial institutions like NBFCs and banks has made it possible. Now it is cheaper and easier to avail of home loans through these institutions just by visiting their website online.
Purchasing a home in India is a crucial financial decision, which an individual takes during a lifetime. Purchasing a home is a crucial life goal for any individual, and a home loan through ICICI home loan
or any other lender assists you to easily meet this goal with ease. Despite the rising property price, purchasing a home has gotten simpler owing to various home loan options prevalent in the market. Falling ICICI home loan interest rate or rate of interest of other home loan lenders and implementation of new government schemes like ‘housing for all’ has enhanced the availability of home loans to any common man. The repayment tenure for a home loan differs from 20-30 years, and thus if you opt for it, you must repay it till the selected deadline. However, the prepayment option at zero charges is always available.
Hence, when you avail of a home loan, there are various things you must take care of. EMI is one of the most crucial parts of a loan, and an in-home loan too it is the same. Ideally, the EMI of a home loan is the initial thing that you must calculate to know the monthly financial burden that generally comes with the home loan and how you would manage it along with your daily expenditures with ICICI Home Loan Calculator. You must always go for it once you have set and estimated an affordable EMI. A home loan is a big-ticket loan amount; thus, its EMI also may be high. To state the fact, your home loan EMI is dependent directly on your loan, repayment tenure and rate of interest at which the loan is disbursed.
Repayment tenure of home loan
Even a little change in your home loan repayment can impact your monthly EMI. Primarily, the longer is your loan repayment tenure, and the lower is your loan EMI and vice versa. However, one crucial thing most individuals often overlook is that having a longer repayment tenure usually comes with a higher interest component. This ultimately results in your credit cost. It means that while your EMI might be lower if you go for a higher repayment tenure, it would be paying a higher amount in the form of interest component in the long term.
Rate of interest fluctuations
One of the most crucial parameters that can impact the home loan EMI is the rate of interest fluctuations. It mostly is applicable to floating rates of interest, which fluctuate according to market change. Such fluctuations have both negative and positive impacts on your loan EMI. The interest may change according to the changes in the international market. When there is any change in the RBI bank rate, it gets reflected in the loan EMI.
However, it does not mean that floating home loans is a bad idea. Whenever there is a fall in bank rate, it lowers the EMI considerably. Fixed loan rate also changes to floating interest rate, but it happens after a predetermined period. Such conversion from a fixed rate to a floating is called a mixed rate home loan. A floating rate of interest home loan is preferable if you have a slightly high flexible income.
Shifting loan to a different lender
One might have availed a home loan from the most suited lender, but it is tough to keep a constant tab on the rate of interest being provided by others during the whole repayment tenure. Borrowers of home loans can change their home loan lender to avail of a much lower rate of interest benefit. It can be done via the home loan balance transfer option. However, before you opt for a home loan balance transfer, it is crucial to ensure that you save exceedingly high on EMIs by switching to another lender. The next crucial thing is the expense involved in transferring your loan must be considered.
Prepaying the principal amount of the home loan
All home loan lenders permit their borrowers to do the loan prepayment towards the home loan. This reduces the outstanding principal component and the burden of interest cost too. Many of the lenders generally charge some per cent of the outstanding principal component as a prepayment penalty. However, when you opt for a prepayment, the amount outstanding lowers and as an outcome of which, the loan EMI is also lowered. However, it is always crucial to check prepayment charges, conditions, and terms before signing the agreement of home loan with the lender. In case the interest component that you must pay on the home loan is on the higher end than the investment return, then it is best you use the savings/funds towards prepayment of your loan.
When to opt for the step-down or step-up method on repayment
The step-up option to repay is mostly suitable for a young individual who has a higher probability of enhancing their yearly income in the future. In this option, the rate of interest of the borrower is lower in the initial years of the repayment tenure and thus is the loan EMI. Here the EMI and interest both increase as the repayment tenure increases. However, the step-down repayment method is most suitable for individuals who are near to retirement or those whose income is thought to lower or stop in the upcoming times. Usually, individuals go for this kind of repayment option when they look to end the loan burden in a lesser time. Here in this EMI, you pay a high amount in the beginning years, which is lower apparently as the outstanding loan amount lowers.
The above top crucial factors increasingly impact your EMI during the repayment tenure of your ICICI home loan or home loan through any other lender. Thus, ensure to compare all the home loan offers available carefully and mindfully to you from different home loan lenders and consider the above-mentioned points before taking your final decision.