Many people dream of building their own home. But buying a home requires wise financial planning, and there comes the home loan. With a home loan, one can achieve the dream of owning a home at a lower home loan interest rate while getting a more extended repayment period.
Not to mention, the home loan EMI calculator makes planning one’s repayment easier.
A home loan can, however, burden one’s finances over time due to its high interest rate and long tenure. One can reduce the rate of interest and EMIs in several ways.
By reading on, get a better understanding of how to reduce home loan interest rates and how to reduce the EMI of existing home loans. Understanding the concept of reducing the rate of interest will also help you figure out your finances.
What is Reducing the Rate of Interest?
The meaning of reducing the rate of interest is the interest amount to be paid is calculated on the remaining loan balance rather than the original principal amount and considers the repayments made.
How to Reduce Interest Rate on Home Loan?
Lower housing loan interest rates by following the below tips.
Choose a Shorter Tenure
The loan duration plays a significant role in determining the rate of interest. Even though longer tenures, such as 25 to 30 years, will result in lower monthly instalments, shorter terms, such as ten to fifteen years, will reduce the overall interest payable.
One can calculate how much interest rate will drop using an EMI calculator if they take out a loan with a shorter term.
Make Prepayments
Make periodic prepayments after taking a loan. Because one pays more toward interest during the first few years of their loan than toward principal and spends more towards principal during the last few years. The principal amount will decrease substantially if one makes frequent prepayments, which reduces the total interest to pay.
Prepayments on fixed-rate loans are subject to a percentage charge. So, one should check with the bank or lender to see if prepayment charges apply.
Compare Interest Rates
Different lenders charge various rates and fees, so one should check third-party websites for a clearer picture. The best thing one can do is research and compare the interest rates on home loans for all banks before choosing a particular lender.
Balance Transfers Can Be An Alternative
It would help if one started making prepayments on their loan before they could do a balance transfer. One can also transfer the remaining principal amount to another lender or bank at a lower mortgage rate if they feel their current lender’s interest rate is too high. One’s last resort might be a balance transfer. One will be penalised if they miss a payment on a balance transfer loan. Therefore, one should only consider home loan balance transfers if they have no choice.
Make a Larger Down Payment
Financial institutions and banks typically finance 75% to 90% of the property’s value. One’s contribution to the remaining cost of the property is expected to be between 10% and 25%. One may contribute more to the down payment rather than paying the least. Paying more initially lowers the loan amount, which, in turn, reduces interest payments.
Find Better Deals
Lenders prefer credit-worthy customers. Existing customers and those with good credit often get preferential rates. One may get better loan rates if their score is close to 800. A responsible borrower might be offered lower loan rates if they repay on time. However, if one has a good business relationship with the lender, they may be able to negotiate with him.
Other than that, watch out for festive sales. Banks offer home loans at reducing interest rates during the holiday season.
Increase EMI
Loan monthly instalments can be revised annually by some lenders. In this case, one can always go for higher EMIs if they have switched jobs and their salary has been raised. By reducing the home loan tenure, one can significantly reduce home loan interest payments. One may check with the lender to see if such options are available.
Conclusion
One can significantly reduce interest costs by following the above tips on how to reduce home loan EMI. One might compare each lender’s interest rates, fees, reviews, and other aspects before applying for a home loan.
And one should always be extra prudent with their financial planning when planning to invest in a luxury property like that of Piramal Realty. It is one of the top builders in the country, offering luxurious residential homes in Mumbai.
Find out what Piramal Realty offers in and around Mumbai through e-tour!
Disclaimer- This article is based on the information publicly available for general use as well as reference links mentioned herein. 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 /disown 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.
Table of Contents
