Homebuyers will have to necessarily demonstrate monetary prudence once the long cycle of equated monthly installment (EMI) payment starts. Since home loans are typically taken for a 20 or 30 years tenure, it would be a long time before you are through with this responsibility. As the home loan EMI would diminish a part of your income every month, it’s in your best interests to inculcate certain changes in yourself to keep finances in order and deal with this new responsibility.
Maintain a certain balance in your EMI account
Each default wouldn’t just result in the bank imposing a penalty for the offence. Your failure to pay the home loan EMI on the due date would also find its way in your credit report that credit bureaus in India maintain. This in turn would lower your chances of applying for more credit in future. In your best interest, avoid an EMI default situation altogether. For this, always maintain a certain balance in the account which is linked to your EMI payment. Ideally, your account should at all times have enough balance to pay three months’ EMI, financial advisors suggest.
Be aware of all the tax benefits you can claim
As the borrower of home loans, you are eligible to claim various tax benefits. (To know all about those, please visit this detailed guide.) By invoking the various sections of India’s income tax (IT) Act, a homebuyer can sum up to Rs 5 lakh of his income as tax free.
However, there are two things that might hinder a buyer from doing so:
- Ignorance about which sections apply to him
- The failure to invoke the applicable sections while declaring your annual investment
This ignorance might result in the borrower suffering great financial losses. One grave mistake on your part would also be to assume that your employer would automatically help you claim all the tax deductions once you share the information on serving a home loan. It’s you who has to claim all deductions and provide proof supporting your claims.
Look for additional sources of income
Banks don’t view frequent job changes as a positive in a borrower. This is why most financial advisors would advise you to stick with one job for some time before you start inquiring about home loans products. However, once you have secured the loan, it’s advisable that you look for another job to increase your income. The best way to deal with an increase in your liabilities is to increase your income; penny-pinching would take you only so far. Also, job security is of supreme concern now that you have additional liabilities. Seek employment only with those companies which offer job security aside from offering you a salary hike.