A home loan is most likely the most significant burden that a person incurs in their lifetime. It is also the loan with the longest repayment period. As a result, most house loan borrowers are constantly looking for ways to minimize their equivalent monthly installment (EMI) outlay. Imagine putting down a particular percentage of your salary on a consistent monthly basis for such a long period! As a result, if you do not plan ahead of time, a high house loan EMI might have a significant influence on your financial well-being and mental health. As a result, strive to lower home loan interest rates before and after taking out a loan by following some simple guidelines. This allows you to pay it off faster and more efficiently, without ever feeling overwhelmed. The most obvious thing you can do is join the correct lending organization that provides the best conditions and competitive interest rates.
So, if you’re thinking about getting a home loan or already have one, keep these 7 vital recommendations in mind to lower the amount of interest you’ll have to pay.
Opt for a Shorter Term:
As previously stated, one of the key elements influencing the amount of interest you must pay is the term of your loan. Though lengthier tenures, such as 25 to 30 years, reduce the monthly installment amount, shorter tenures, such as 10 to 15 years, assist minimize the overall interest payable. Using a home loan EMI calculator, you can see for yourself how the interest rate is substantially lowered for loans with shorter terms. So, before you sign up for a loan, carefully consider the duration so that you don’t wind up paying more interest on your loan.
Prepayments are a Viable Option Too:
On floating rate loans, lenders do not charge prepayment or loan foreclosure fees. So, if you have a debt, try to make prepayments on it from time to time. This is because, during the first few years of your loan, you pay more toward the interest than you do toward the principle. Making regular prepayments will significantly reduce the principal amount, lowering the total interest. It should be noted, however, that lenders do charge a percentage on fixed-rate loan prepayments. As a result, it’s a good idea to check with your bank/lender to find out what prepayment fees you could have to pay.
Online Interest Rate Comparison
Before selecting a certain product or lender, you should conduct thorough research on loan products and compare rates. Several third-party websites may provide you with a more detailed view of the rates and other fees charged by various lenders. As a result, it’s advisable to examine house loan interest rates from all banks before deciding on a certain bank or home loan package.
Balance Transfer on a Home Loan Could Be an Option
Home loan balance transfers become available only once you have begun making prepayments on your loan. If you believe your current lender’s interest rate is too high, you can transfer the remaining principal amount to another bank or lender with a lower interest rate. Balance transfers, on the other hand, should only be used as a last resort. Missed payments on balance transfer loans result in increased penalties. So, only consider a home loan balance transfer if you have no other options.
Pay a Larger Down Payment
Most banks and other financial institutions finance between 75% and 90% of the entire value of the property. You are expected to contribute 10% to 25% of the remaining cost of the property. However, rather than paying the least amount possible, it is preferable to contribute extra from your pocket as a down payment. The more you pay upfront, the lower the loan amount, which directly minimizes the interest you must pay.
Look for Better Offers
It is common knowledge that lenders prefer customers with a solid credit history. Banks frequently provide preferential rates to returning customers or those with a solid credit history. So, if your credit score is near 800, you may be able to acquire higher loan rates. As a result, if you have been a responsible borrower and have made all of your repayments on time, you will most likely be offered lower interest rates on your loan. If not, you can haggle with the lender if you have an excellent business relationship with them. Aside from that, keep an eye out for holiday deals. During the holiday season, banks frequently cut their interest rates.
Boost your EMI
Some lenders allow you to adjust your monthly payment once a year. So, if you’ve changed jobs for a larger wage, you can always choose for higher EMIs to shorten your term. And, when the loan’s tenure is lowered, the overall interest you must pay will be significantly reduced. Check with your lender to see whether such possibilities are available.
Some Additional Tips
- Another expert-recommended method for lowering your home loan interest rate is to switch from a fixed-rate loan to a floating rate if you have a fixed-rate loan in the first place. Keep in mind that the interest obligation for a fixed interest rate is frequently higher than the one for a fluctuating interest rate. With home loan interest rates at an all-time low, switching may be a wise decision. Obtaining a fixed home loan interest rate, on the other hand, is an uncommon occurrence these days, as most lenders provide variable interest rates at reasonable rates.
- If you’re going to sign a home loan, think about putting down the most money possible. Remember that the more you pay, the lower the overall loan amount and interest rate.
You now have expert advice on how to lower your home loan interest rate. Of course, there are other intricacies to obtaining a lower home loan interest rate. Each lender has a different option to lower your interest rate and reduce your overall home loan liability.
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