Smart tips to reduce the interest rate on your home loan
When investing in real estate, repaying a home loan can be a tedious procedure. If not worked out correctly, paying home loan EMIs (equated monthly installments) could hamper your monthly budget for a long time.
You can find ways to lower the interest rate of your home loan. This will help in reducing your burden. As a result of poor planning, you may often end up paying a lot more than your loan. It is essential to find the right lender who offers you the lowest interest.
A short tenure
Your loan tenure is a primary factor responsible for the interest rate you are supposed to pay. Longer tenures (25-30 years) will definitely cut down your monthly installment, but shorter tenures (10-15 years) will reduce the interest payable. By using a home loan calculator, you can see how the interest rates reduce for loans that have a shorter tenure. Hence, choose the tenure wisely before you sign up for a loan.
Try out prepayments
No loan foreclosure charges or prepayment is charged on floating rate loans by the lenders. Try and make prepayments if you have signed up for a loan. As you pay more towards the interest in the first few years of your loan as compared to the payments made at the end of the loan. Your total interest will be reduced if you make frequent prepayments. But, keep in mind that on fixed-rate loan prepayments, a few lenders charge a certain percentage. Hence, it is best to check beforehand with your bank/lender about the prepayment charges.
Check the interest rates online
Before deciding on a bank or lender, it is essential that you do thorough research and compare rates. There are many third-party websites available where you can get a clearer picture of the charges and rates. Therefore, it is best you compare the home loan rates before investing in housing finance.
Increase your down payment
Most of the banks finance 75-90% of the total value of the property. You are expected to contribute 10-25% of the remaining cost of your real estate. However, instead of paying only 10-25%, it is best if you can contribute more as the down payment. The more you pay initially, the lesser is the loan amount. This in turn reduces the interest rate as well.
Look out for better deals
Customers who have a good credit history are always preferred by banks and lenders. If your credit score is close to 800, you might get better rates than others. So, it is always better to be a responsible borrower. This will increase your chances of getting lower interest rates. Also, keep a check on festive offers. Usually, banks lower their interest rates during festivities.
Increase your EMI
There are lenders and banks who let you revise your installment plans annually. So, if you are doing well, you can always switch to higher EMIs that reduce the tenure. The overall interest rate that you have to pay for your loan will automatically come down when the tenure is reduced.
To reduce your burden of interest, do consider these tips before or after taking the home loan. Ensure you have read all the terms and conditions and reviewed all the charges before you sign up.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
