Repaying a home loan can be stressful and it can put a lot of burden on your Equated Monthly Instalments. So, you must work this out properly. Home loan interest rates vary from one lender to another. And finding out the best deal on the interest rate for home loans can take you some time. Hence, you should know all the necessary tips to reduce the home loan interest rate burden. The principal amount, repayment tenure, and the interest rate on the loan are the primary determinants of your EMI. Since purchasing a home this day is an expensive affair they opt for getting the funds via home loans. We know that in the case of loans the interest amount sometimes costs more than the actual loan amount. So, you need to find ways to reduce the home loan interest rate.
In this article, there are a few tips on reducing home loan interest rates.
Choose a shorter tenure
As mentioned above, your repayment tenure is one of the factors in determining your monthly instalment. It is true that longer tenure, for instance, twenty-five to thirty years, will cut down the EMI. However, shorter tenure, say ten to fifteen years, will help you reduce the overall interest rate payable on home loans. You can use the home loan eligibility calculator to see how the interest rates drastically reduce when you select shorter tenure. Hence, before you apply for a loan, carefully select the tenure so that you don’t end up paying higher interest rates on your loan amount.
Compare the rate of interest on home loans online
Before you opt for a certain home loan scheme or lender, you should conduct thorough research on interest rates and loan schemes. Numerous third-party lenders may help you understand the interest rates and additional fees that lenders may charge. So, evaluate interest rates on home loans from all lenders before you set your mind on a specific lender or a scheme for a home loan.
Go for prepayment (if you want)
Lenders don’t levy foreclosure or prepayment fees, on floating rates of interest. Hence, you need to make periodic prepayments, if you have taken a home loan. There is a need to pay more interest amount than the principal amount in the first few years of the tenure. So, make regular repayments. This will significantly reduce the principal amount hence, lowering the total interest. It should be noted, that on fixed-interest rates on home loans, lenders may impose a certain percentage. As a result, it is advisable to check with your lender regarding the prepayment fees that you have to pay.
Increase your down payment
Most lenders fund 75% to 90% of the overall property value. You must provide ten per cent to twenty-five per cent of the remaining price of the asset. But, rather than paying the least amount possible, it is advisable to contribute extra from your pocket as a down payment. The more you pay as a down payment, the lower will be the loan amount, This will immediately minimise the payable interest.
Choose a home loan balance transfer as an alternative
As a borrower, if you have started making repayments on your loan, you can avail of balance transfers. If you think that your existing lender is offering you high-interest rates you can transfer your balance loan amount to another lender, which will offer a lower interest rate. Note that, if you miss repaying on the balance transfer, the new lender will charge you with fines. So, keep home loan balance transfers as the last option, if you don’t find another solid alternative.
Pay more as EMIs
Some lenders provide borrowers with the benefit to customise their monthly payments once a year. So, if you have switched jobs for a higher salary, you may always choose greater EMIs to reduce your tenure. And, with the shortening of the loan duration the total interest you must pay will significantly come down. Talk to your lender to find out whether such possibilities are there.
Check if there’s any better deal available
There is no doubt that lenders would prefer customers with a solid credit history. Every lender would want to reach out to a large number of borrowers. And to do that, they provide affordable interest rates. So, if your credit score is above 750, you can acquire higher loan amounts. Also, if you can make all your repayments on time, you can likely get reduced interest rates on home loans. You can also negotiate with the lender if you have a good business connection with them. Apart from that, keep an eye out for deals available. Financial institutions often cut down home loan interest rates during the holiday season. Don’t miss your chance.
So, if you want to get a home loan, consider these above-mentioned tips. These can help you reduce your interest rates on home loans. Also, make sure you read all the terms and conditions that your lender will provide you before applying for the same.