Even a slight increase in home loan interest rates can spoil your balance. Let us tell you some tips, by which you can reduce your home loan interest rate.
The value of a house is equal to the savings of a person for years or a decade. In such a situation, home loan remains the only option for buying a house. However, due to long duration and high amount, the burden of big EMI falls on you, leaving you less money for the rest of the work. Apart from this, due to the high interest rate of home loan, your budget can also get spoiled. Let us tell you some tips, by which you can reduce the interest rate of your home loan.
For existing home loan customers
Choose a home loan balance transfer and get your loan term extended. If the duration of the home loan is longer, the EMI will be less, most of us extend the home loan period so that the burden of EMI is reduced. But going to the existing lender and further extending the loan term is called loan restructuring, which may fall under the scope of a rewriting standard. This will affect the credit score of the customer and it may become difficult to get a loan or credit card in future. Instead, choose home loan balance transfer, which is for low interest rates and long term.
For example, suppose you have taken a home loan of Rs 35 lakh for 22 years at an interest rate of 9.5 percent. Your monthly EMI is 31,656. Currently, your outstanding home loan amount is Rs 30.31 lakh and the loan tenure is 15 years.
If you want to transfer the home loan balance to another lender for the remaining 15 years, whose interest rate is 8.5 percent, then the EMI will come down to Rs 29,853. At the same time, if you choose a longer period of 25 years, the EMI will come down to Rs 24,411. But due to the longer loan period, you will have to pay more interest. If you have additional money in future, you can repay the loan before time.
Remember that the new lender will take your home loan balance transfer application as a fresh home loan application. Therefore, there will be charges like processing fees, administrative charges etc. Therefore, definitely consider these charges before balance transfer. Therefore, choose the option of balance transfer only when the savings interest is more than the balance transfer amount.
For new home loan customers
1. Choose a large home loan term: While applying the home loan application, choose a long home loan term. This will not only reduce your EMI but will also increase loan eligibility. But at the same time the cost of interest on the loan will also increase due to the longer duration. So if you have money in future, then try to give some pre-payments. Remember that the Reserve Bank of India (RBI) has banned lenders for changing the pre-payment fees in the case of floating rate loans. At the same time, in the case of fixed rate loans, they can levy or remove this fee. Use online EMI calculators to choose the right loan term based on your repayment capacity.
2. Pay more down payment: RBI has allowed lenders to finance 75-90 percent of the property cost as a home loan. Customers will have to pay the remaining amount from their own pocket as a down payment. Most customers opt for a low down payment option. While the option of more down payment is best for customers. Paying more down payment reduces the loan amount, which leads to lower interest cost and EMI. Paying more down payment also increases the chances of loan approval as the risk of the lender decreases. But do not abandon your emergency fund or savings while paying more down payment. By doing this, you will have to take a loan at a higher interest for the rest of the work.
3. Compare loan offers of different lenders: Before finalizing any lender, consider the options of loan offers based on interest rate, processing fees. Different lenders have different interest rates and associated fees. For example, many lenders offer home loans at low rates to customers who have very high credit scores. Many people decide the loan rates given their jobs and company.
Today various banks are offering home loans so you can go online and compare interest rates. These people give home loans considering your credit score, monthly income, job profile and other eligibility criteria.