With rising property rates and relatively mediocre incomes in the private sector, the best way to purchase a home these days is using a home loan. You can buy your dream home and keep repaying the amount in easy installments close to your rent.
But a home loan comes with a long term obligation. It can become quite a burden during financially taxing times like marrying your daughter. If you miss a few installments, the EMI becomes even higher and your credit score will also decrease which can affect your home loan eligibility.
But there are a few methods that can help you reduce your current home loan interest rates. Go thoroughly through this list of the most effective methods and reduce your loan burden. Here is a list of some tips which is effective to reduce the home loan burden.
Tips to Reduce Your Home Loan Interest:
Use the EMI Waiver Option
Lenders often give lucrative options if you pay your loans regularly. Lenders like PNB Housing also waive off a few EMI when your loan tenure nears the end.
But you should also read the terms and conditions of the waivers carefully. Some waiver may result in higher EMI & home loan interest rate for a shorter period than you may not be able to pay.
Pay A Higher EMI
Since home loans are of longer tenure, your income would increase over time. That might double or triple over a decade. Try allocating some part of your hiked income to the repayment of the loan.
Increasing the EMI amount will help you get pay off the loan faster with less accumulation of the home loan interest rate. Even increasing the EMI by 5% would also reduce the payable interest rates and have a significant impact on overall payment.
Try Prepaying The Loan
You may end up paying double the amounts that you borrowed in a home loan after getting your home loan eligibility. For instance, if you borrow 50 lakhs at 9% for 20 years, you would end up paying 57 lakhs extra in total. That would amount to a whopping 107 lakhs which cross the double limit.
To reduce the total amount, experts typically suggest paying some amount of the loan when you get a lump sum income or have disposable cash.
Even prepaying 5-10% of the amount in one go can reduce the interest rate by a significant margin. Also, keep in mind to prepay when the interest rate is falling to make most of the opportunity.
Try Negotiating With The Lender
Another effective way to reduce your home loan repayment burden by negotiating the lender to pass on the benefits that the government provides. At times, the lenders may not pass the complete benefits.
For instance, if the RBI reduces the repo rate by around 80 basis points, and your lender may only reduce that by 30 points or so. You should be aware of the policy changes and revision which can make you capable of negotiating.
Repaying the loan can be a hugely taxing task if you don't be proactive in getting the interest rates reduced. Consider whichever factor applies to you and reduce your burden now.