A Home Loan is surely a fabulous financial instrument that assists people to achieve once-in-life decision of having their own dream home. However, when you plan to buy a house on a Home Loan, it also brings a long-term liability that even sticks to you for many years.
Hence, a Home Loan interest is one of the most significant elements other than the EMIs payouts that borrowers consider while availing a House Loan.
A Home Loan EMI also makes for 30-40% of your monthly income, and that’s why you should try to get a Housing Loan at a low rate of interest.
Although people choose the longest possible tenor of the loan and EMIs to become affordable, the Home Loan interest rate payout goes up.
Let’s help you with some easy steps that you can follow to reduce your Home Loan interest rate. Of course, you very well know that having a good CIBIL score and a clean repayment history will also help you in getting a reasonable Housing Loan rate of interest.
Step 1: Opt for a shorter tenor
If you go for a shorter tenor, you also get to repay the principal amount faster. Always know that a Housing Loan interest rate is calculated on the total outstanding amount and if you pay it quickly, your absolute interest goes down.
If you continue to pay the EMIs over a longer period, although the Home Loan interest rate will remain the same, the absolute rate of interest will keep going up. It would also mean paying more than what you have saved in case of a short tenor selection.
You can take the help of a Housing Loan EMI calculator to know how much EMI you will pay. What’s more, the Home Loan interest calculator will also let you know the interest of which you will be paying the EMIs.
Step 2: Pay additional 5% EMI monthly or one extra EMI each year
If your current monthly income does not allow making a higher EMI payment each month, you can add a mere 5% extra to your existing EMI figure and pay. Doing this will help you subsequently lessen the principal amount. What’s more, if you get some yearly incentive or bonuses yearly, you can utilize the amount to pay an extra EMI to decrease the burden.
Step 3: Home Loan balance transfer
If you are already having an existing Home Loan and just discovered that your service provider is charging a higher rate of interest, you can always go for the Home Loan balance transfer facility to a new lender offering a low House Loan interest rate. You will see many online lenders offering this facility, and if your Housing Loan interest goes down even by 0.75 or 1%, you will be able to save much more than what you are paying as EMIs.
Step 4: Switch to MCLR
You should know that all Home Loans taken out after 1st April 2016 are linked to MCLR of banks. If you have availed a loan from a non-banking finance company (NBFC), the MCLR system won’t apply to it. So as a borrower your first priority should be gathering more info about the MCLR-Based Home loans. However, you can still readjust your interest rate by paying a conversion charge. When you switch to MCLR, it means that you can avail the advantages of interest rate changes quickly.
The Bottom Line
As an existing Home Loan borrower or even if you want to avail a Home Loan in future, you should ensure to land a Home Loan deal that helps you get an affordable interest rate. Additionally, deploying the discussed factors will aid you to reduce Home Loan interest rate easily.
