Home Loan EMI tenures are running beyond the retirement age in the case of many borrowers today. While repo rate hikes by the RBI have resulted in a sharp increase in EMIs, many borrowers have tried to avoid the pain of high EMIs by allowing lenders to increase their home loan tenures.
In several cases, borrowers have opted for very long-term loans that stretch beyond their retirement ages. Typically, 15-20 years is considered an ideal home loan tenure. But many borrowers have opted for very long-term home loans of 25-30 years and they are now liable to pay EMIs even after their retirement age.
If your home loan EMI is also stretching beyond the retirement age, the following are five tips that you can use to reduce the burden:
Close the loan as soon as possible
Increasing home loan tenure instead of EMI amount can put a borrower in a permanent debt trap. If you are feeling that EMIs have become a big burden, you should try to close the home loan as soon as possible by any means.
You can enjoy the true benefit of a home purchase only if it is debt-free. It will not only ensure peace of mind but also increase the profit margin in case you have to sell the house in future.
In case, you have purchased the house for selling it later at a higher price, you will not be able to make any significant gain due to the home loan interest that may be higher than the actual price in case of very-long term loans.
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However, it may not be possible for everyone to close the home loan soon. Such borrowers can explore the following options.
Negotiate with the lender
You should negotiate with the lender and ask them to increase the EMI amount instead of tenure. You may even negotiate for a lower interest rate in case your credit score is healthy.
“Borrowers should speak to their lenders to look at other loan repayment options. However, each lender is different and borrowers should speak to their lender directly to understand what is possible,” says Atul Monga, CEO and CO-Founder of BASIC Home Loan.
Home loan balance transfer
In case the lender doesn’t provide a viable solution, you can explore the home loan balance transfer option.
“If the existing lender cannot offer a viable solution, one may consider opting for a balance transfer to another lender offering a lower interest rate. While opting for a transfer, it is important to know the Current Credit score, the total tenure, the outstanding interest to be paid, etc., before opting for a balance transfer,” says Sumeet Srivastava, Founder and CEO of spocto, a debt-recovery platform.
Also Read: Step-up and Step-down Home Loans: Should you opt for variable EMIs?
Partial prepayment
Another option is to start making partial prepayments to reduce the principal component of the home loan. You can start doing so with any amount after talking to the lender.
“Borrowers can consider having several options to get out of the difficult situation, like negotiating with the lender to lengthen the loan term or lower the EMI amount, or taking into account partial prepayment to lessen their monthly payment obligations,” says Srivastava.
“Depending on their situation, they may be able to do the home loan balance transfer at a lower rate or make extra payments in order to pay off the loan before retirement age. This could help to shorten the loan tenure and enable the borrower to pay off the loan before retirement age,” says Monga.
Refinancing
It is important for borrowers to proactively manage their home loan EMI tenure to ensure a comfortable retirement. To ease the burden of long EMI tenures, borrowers can explore the refinancing option also.
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“Lenders do not usually increase their repayment tenures beyond their respective retirement ages. However, you can consult your existing lender and refinance that balance amount into another loan and keep paying it off in smaller monthly settlements. Having a co-applicant with a steady income is great in such scenarios. You may even end up availing of lower interest rates,” says V Swaminathan, Executive Chairman at Andromeda loans and Apnapaisa.com.
“If your mortgage has no pre-payment penalty and you have extra cash reserves, consider paying a lump sum amount and closing it off. However, make sure that you have the liquid cash to do so. You do not want to end up house-rich and cash-poor in your retirement,” he adds.
