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03 September 2011

Do You Know Where Your Money Goes?

People , when out to purchase a home often discuss about the rates, the costs of construction and thus the EMIs of bigger amounts whenever they mention home buying and home loans. Yes this is a very important aspect of home loans which no one even seems to realize. Why does your house become much dearer when you have taken it on a loan?
The housing finance company offers loans for individuals that have the repayment capacity. With many housing companies coming up in every nook and corners of the city one has to choose the right loan lender for easy repayment schedules. These companies offer many schemes and discounts for loans to encourage customers to avail their services.The interest rate is calculated in such a manner that you may not understand these procedures and feel they have put low EMIs in the beginning and later on these EMI amounts increase. Financial planning is very important for the easy repayment of your loans.
Do you know where your money goes?
When you calculate your home value it is according to the area per square foot in that part and the rates going on now are from as low as 5,000 per square foot to as high as 50,000 to 1 lakh depending upon the area. Your housing finance company will add the interest along with the principal amount and as a result the cost of your home will become much higher than if you would have purchased it out right paying cash or cheque.
Where does your money go? it is going in form of interest to the housing finance company. Your earlier beginning EMIs will consist of majority interest amount so that your principal amount is pending and even if you wish to opt out you come to know that the loan amount is pending and the beginning EMIs have been used to cover up high interest amounts. After a set period will begin the movement of repaying your principal amount in large sums and this will lead you to reduced principal amount in later years of your loan tenure.
The borrower must discuss all these financial aspects before committing a home loan. It is advisable to always discuss prepayment option and prepayment charges or any penalties before hand so that you can plan your finances and also consider opting out of your home loan earlier than the scheduled loan tenure.Always ask question, inquire and discuss about means to save precious money during repayment of loans. Remember as in cooking it is said that too many cooks spoil the soup but in finances too many people can give your different advice for investments and also loan repayment tricks and tax benefit advice.

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