Things To Consider While Buying Your New Home In EMI

Things To Consider While Buying Your New Home In EMI - Nick Statman

One of the biggest financial decisions you are ever likely to make is the decision to purchase a home. In particular, when acquiring things on EMI, which is an equated monthly instalment, then, it becomes very important that a lot of factors are given a critical look before making the deal. The information below by Nick Statman will help anyone thinking about investing in a property under an EMI scheme to consider certain factors when making the investment.

Down Payment Amount

When individuals go for home financing, most of the lenders will expect the borrower to bring down a 20 percent down payment. However, some of the banks have been extending easier EMI options where the buyer has to pay as low as 10-15% down payment. But lower down payments, which make a car seem the more reasonable purchase, result in higher interest charges in the long run. Understanding your budget analysis to find out how much down payment you can make is important because a higher down payment means lower EMIs and cost savings in the long run.

Interest Rates

Interest forms the largest cost element of EMI, or at least it represents the largest cost, which keeps fluctuating. One should undertake a detailed analysis of the rate of interest offered by various banks as well as NBFCs. Nick Statman suggests choosing between a fixed or a floating rate in relation to considering future trends of rates as a choice. Also, look if there are any reductions in the interest rate that you stand to benefit from once you transfer your business to that bank. A difference of just half a percentage point in interest can cost lakhs over the tenure of a home loan of 20 years.

Loan Tenure

Home loan tenors are flexible as the normal tenors for home loans are between 10-30 years. Bigger loan tenures range between 20 to 30 years, producing even smaller EMI to pay but more interest cost over the period of the loan. Revisit your retirement age and future earnings potential while deciding your ability to repay and the loan term, objectively. Ensure a good set of affordable EMI and long term loan costs are available.

Prepayment Options

Originally, most home loans charge very high interest if you foreclose before 3-5 years. When determining your ability to afford EMI, estimate large expenditures that are expected to occur 3-4 years from the date of early termination of a loan according to Nicholas Statman. Further, you should know your bank's rules on prepayment charges that apply where you make regular (annual) foreclosures against your loan. This will enable you to manage as well as to maximize your savings and loan repayment.

Conclusion

Real estate investment is acapital-intensive investment that finances a large portion of the purchaseprice of the property, according to Nick Statman. As withany other loan, be very cautious when determining your borrowing capacity,interest on the loan, and the period of repayment before fixing your EMI. Knowabout the optimal down payment and rate of interest, avoiding charges forforeclosure. That can help you to save lakhs over home loans. Ensure you haveresearched across many banks and gotten the best home financing deal. This willhelp you to fully narrow down your search for the best deal where you can findfinancing for your dream home.