Commercial Loan Home Loan Repayment Options can impact your Financial Planning
Your decision to buy a home of your own is a major financial decision.It involves huge amount of financial commitment from your end.For most people this means a stretching of the funds and going in for a home loan from the bank. Now you have got to research and understand all about the loans and the various options before you move to the bank to apply for the home loan.
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You borrowing from the bank has a larger impact on your personal financial status. Normally the tenure of a home loan is in upwards of ten years. So your financial planning would have to take into account this long tenure as well as your other priorities in life too. You have also got to factor in your taxation. You get to save income tax through the rebate on interest paid towards the home loan.Keeping in mind all of these points you would need to work out your budget for repayment. Normally the experts advise you to limit your monthly repayment to one third of your total earnings. It is estimated that a salaried person can pay only this much comfortably towards the repayment of his loan outstanding.
When it comes to repayments of your loan, there are several methods of repayment that you can work out with the banks. Understanding of the different options can be had through a detailed explanation from the bank's representative.
We have covered here for you some of the options at a macro level.
In the home loan segment you have one of the categories of loans called as Step Up Loan. This loan is tailored for those persons who are just starting their career now. Assuming that their future income generation will keep increasing, the loan repayment is worked out in such a way that in the initial period the monthly repayment is kept smaller.As the years go by the repayment amounts increase along with the increase in income. Based on the future potential of revenue generation, you will be able to avail a larger loan sanctioned.
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A Step Down loan is one which works the opposite of a Step up loan.This loan scheme is aimed ideally at those professionals who have a decade or so to retirement and are earning a steady income today.Accordingly the Equated Monthly Installments are kept very high for the first few years and they get lowered as the years go by.
The third type of repayment scheme in home loans is called balloon payment. You will start paying a lower monthly repayment sum but you will have to make a lump sum payment at a point of time in future and commit to it.
Then there is also the Accelerated repayment loan where in the borrower can make part payments against the loan outstanding whenever he accumulates some saving.Of course there is a ceiling as to how many times he can make the repayment in a year. With each repayment you get to save on the interest flow because the bank calculates the interest on the principle outstanding on daily basis.
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