Buying a home is more than just making an investment. It sets a precedent for moving towards your own personal life goals. When purchasing a house, you invest a lot more than just your savings and your money. However, this momentous occasion is often marred by the thoughts of undertaking the immense financial pressure of paying off a home loan. Many people believe that a substantial amount of your savings would end up being used while paying off a home loan. However, if tackled the right way, you may never need to worry about a single EMI or closing your loan in time.
As with any other long term investment, taking financial planning advice while availing a home loan will help you overcome the financial burden of clearing your debt. With the right investments and savings tactics you can breese through your home loan repayment without ever breaking a sweat. Here are a few tips that will help you keep your savings and investments intact while repaying a home loan.
- Creating A Safety Net – Before you even consider taking up a home loan, set up a financial safety net. A home loan requires a large amount of capital every month, if you stretch yourself out too thin, you may end up either missing an EMI or stressing out over other recurring and emergency expenditures. The situations could be anything from medical emergencies or even the payment of school or college fees.Taking simple precautionary measures like setting aside at least 6 months of your salary in an emergency fund, and taking insurance for you and your family will go a long way to keep you financial secure during the loan repayment period.
- Simplify – There’s no need to keep reminding you that paying off a home loan can place a fair amount of stress on your finances. In order to mitigate some of this stress, take a long, hard look at your expenses and see which ones you can do without. If you have too many credit cards, surrender the ones you don’t use often; this not only limits your spending, but also reduces the amount of debt you accumulate while paying off your home loan. Make sure you have a retirement plan in place as well, especially in case your home loan tenure extends beyond your retirement date.
- Don’t Rely On FDs – A big mistake that many people do is park their savings in fixed deposits. Savings accounts and fixed deposits do not attract enough interest to cover inflation charges. Investing in fixed maturity plans, mutual funds, and equity linked savings schemes is a much better option if you have a home loan to pay off.Additionally, you can also invest a small part of your income every month into debt funds. This way you can use the accumulated sum to pre-pay a part of your loan.
- Keep The Long Term In Mind – Paying off a home loan can sometimes take an entire lifetime. In order to successfully pay off your home loan and save up for your retirement it is advisable to invest with your long-term financial goals in mind. A small investment, even 10% of your loan EMI in equity funds, has the potential to pay off your entire loan in 20 years.
Needless to say, financial planning can help you achieve your dream of owning a home without encroaching on all your other financial goals and needs. If you’d like to get a better idea of how you can keep your savings intact while paying off your home loan, get in touch with a certified financial planner or wealth management firm.