Home Loan Foreclosure? Checkout the Do’s and Don’ts
If you are a real estate buyer and are considering foreclosing on a Home Loan, then be sure to evaluate the pros and cons of this type of transaction. A through research is suggested before starting the foreclosing process. Yes, the RBI did remove all foreclosure charges in June 2012 for borrowers. But that doesn’t mean that you have to rush to close out your loan. Given here are some points to will help you understand the complete process of how to foreclose Home Loans.
Complete Process How to Foreclose Home Loans:
What Percentage of Your Income is your EMI
The percentage of your monthly income that you’re allocating as an EMI payment should not be more than forty per cent as this can hamper the smooth budgeting of your financial planning. In case the EMI percentage is more than the given number then it is suggested to pay off your Home Loan amount as early as possible. You must also consult your loan officer for every change that is made on the transaction in order to help you avoid the cons of getting into the process of foreclosing a Home Loan.
Evaluating the Impact of Losing the Tax Benefit
One of the disadvantages of opting for a Home Loan foreclosure is missing the opportunity to claim certain tax deductions. A complete evaluation of the impact of foregoing certain tax benefits when you plan to foreclose a Home Loan is thus necessary.
How a Foreclosure can have an Impact on the Rest of your Financial Planning
Financial planning includes some important factors like education funds for the children, retirement plans, insurance payouts, health care bills and many more expenses. Therefore, always check that your foreclosure is not creating any hindrance against these priorities. The amount of repayment on a Home Loan foreclosure should always be from your surplus funds left over after all essential payments have been made.
Removing the Burden as soon as Possible
It is not recommended to foreclose your loan within 6 months of taking it as doing this might lead to a higher processing fee. However, a late repayment of the principal amount of the Home Loan is also not recommended.
Calculating the Trade-Off between Interests Paid and Returns on Other Investments
Your surplus amount can be invested in numerous ways and you might find it alluring because of its good returns over a period. However, an exception can be made where you are about to retire and your salary income is going to get over, in such cases foreclosure could be more attractive. Read this post to know the Charges other than interest associated with Home Loans
Buying a Foreclosed Home
There are pros of buying a home that has been foreclosed. However it depends on the phase of the process. Some people view buying a foreclosed home as a “steal”. This is because the seller is usually in dire need of funds and is willing to make as many adjustments as possible to facilitate the sale. The buyer can also avail a regular mortgage to finance the foreclosed home. However, the cons of buying a foreclosed home include a fast sale, a sale not below the loan amount owed to the bank by the seller and the lender’s approval of terms and conditions as well as the price of the home.
All of us want to get a good deal when it comes to Home Loans whether we are buying a foreclosed home or we want to get rid of the long-term responsibility of paying off for the loan. Complicated procedures are involved in the process and the above pointers can help you in taking the correct decision for your future. You must understand the bigger picture and take decision optimally. Do you research and after assessing all the pointers deeply, if you find everything is positive then definitely opt for the foreclosure of your Home Loan. Read this post to know How to choose best Home Loan repayment