Home loan EMIs(equated monthly instalments) can drain your monthly budget if you don't have asuitable plan. Remember that the amount of your loan, the interest rate on yourloan, and the term of the loan are the most important factors in your EMIs.Sometimes you may overpay on your loan due to poor planning.
So, if you'replanning to take out a home loan or have already taken one, here are 5 basictips to help you cut the interest rate.
Tips for Reducing Home Loan Interest Rates
1. Go for a shorter tenure
As mentionedearlier, one of the main drivers of the interest you have to pay is your loantenure. While a longer period, such as 25 to 30 years, will reduce the monthlypayments, a shorter period, such as 10 to 15 years, will help reduce the totalinterest payable. You can see for yourself how loan interest rates have fallen drastically with shorter terms using the home loan calculator for home loans. Therefore, before applying for a home loan, choose your term carefully so that you do not pay higher loan interest.
2. Compare interest rates online
You need tostudy credit products carefully and compare interest rates before deciding on aparticular product or lender. There are several third-party websites that cangive you a clearer picture of the interest and other fees charged by differentlenders. So it is best to first compare homeloan interest rates for all banks and then decide on a particular bank orproduct for a home loan.
3. Home loan balance transfer can be an alternative
The balance transfer comes into picture when you have already started paying your loan. If you think your lender's current interest rate is slightly higher, you can transfer the principal balance to a bank or other lender at a lower interest rate.However, transferring loan should be a last resort. Any missed loan payments due to balance transfers will be subject to higher penalties. So only go to a home loan balance transfer if you have no other option.
4. Pay more as down payment
Most banks andother financial institutions finance 75 to 90% of the total property value. Youare required to pay 10 to 25% of the remaining property price. However, insteadof paying the minimum, it is better to deposit more than your pocket money inadvance. The higher you pay initially, the lower the loan amount, which directly reduces the interest you have to pay. Learn How to calculate business loan by using business loan calculator.
5. Increase EMI
There arelenders that allow you to check your rate annually. So, if you have changedjobs with a higher salary, you can always opt for a higher EMI to shorten thetenure. And when the term is shortened, the total interest you have to pay onyour loan drops significantly. Check with your lender to see if they offer such an option.
Consider these factors before or after taking out your homeloan to reduce interest expense.
