Applying for a home loan requires careful consideration of your finances and repayment capacity. If you opt for a high EMI, it puts undue pressure on your monthly budget, leading to delayed or defaulted payments. One way to reduce the repayment burden for new as well as existing home loan borrowers is with home loan interest rate reduction.
If you are confused about how to lower the interest rate on your home loan, read on.
How to Reduce Home Loan Interest Rate?
Compare interest rates and finalise a lender online:
When finalising the lender for your home loan, choose one that offers the perfect balance of trustworthiness, easy loan processing, seamless repayment and low interest rates.
Choose your home loan tenure wisely:
A longer tenure implies you will end up paying more as interest repayment. Thus, for home loan interest rate reduction, opt for a shorter tenure. For existing loans, you can consult your lender about how to reduce your home loan tenure. You might need to provide a formal application letter for reducing home loan tenure to the lending institution.
Opt for lump sum repayment:
Make a point to deposit any bonus, salary hikes and additional income as loan prepayment to reduce the principal and interest levied. With early repayment, you can foreclose the loan before the decided tenure and save on interest payments.
Go for a higher down payment:
A higher down payment (considering your overall budget and financial plan) equals a lower home loan and, thereby, home loan interest rate reduction.
Bump up your EMI:
Go for a regular reworking of your EMI based on regular salary hikes and an increase in income. A higher EMI equals lower tenure, which means your interest payment is considerably reduced.
Transfer your loan balance to another lender:
Transferring your balance loan amount to another lender should be the last answer to how to reduce the home loan interest rates. Once you have begun repayments and feel that the current lender is charging higher interest, you can move your balance loan amount to another lender with a lower interest rate.
MCLR-linked Home Loan Interest Rates
The introduction of the Marginal Cost of Funds-based Lending Rate or MCLR in 2016 replaced the prevailing base rate system. MCLR is a dynamic rate, and lending institutions need to immediately apply the changed rates to disbursed loans with a floating rate of interest.
As a result, borrowers can benefit from rate cuts by the Reserve Bank of India (RBI) if they opt for a floating interest rate. Additionally, to further boost transparency, lenders have to mandatorily list their MCLR rates on their websites for customers’ reference.
Thus, check the prevailing MCLR of your lending institution, opt for a floating rate of interest and ensure that any rate cuts are applied to your home loan interest rate as well.
How to reduce home loan EMI?
If you are not able to service the EMIs due to a salary cut or loss of income, you can request the bank for a reduced EMI. However, any reduction in the EMI is subject to the individual lender’s guidelines and discretion.
Can you request a home loan interest rate reduction with a high credit score?
If your credit score is above 800, it indicates that you are a dependable borrower and can ask for a home loan interest rate reduction. Most lenders offer interest rate discounts for regular customers and customers with a good credit history. Get clarity on how to request a reduction in interest rates from the lender.
Disclaimer: This article is based on the information publicly available for general use. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.