A home loan is borrowed by an individual from banks and non-banking finance companies (NBFCs). It is majorly to buy a property.
It allows you to borrow funds to purchase a house property at a predetermined rate of interest. You can repay the amount in equated monthly instalments (EMIs).
Home loan EMIs can be very heavy to pay on your monthly financial budget. It depends on many factors like the loan amount, interest rate, loan tenor and the like.
It primarily depends on the interest rate on your home loan. By reducing the housing loan interest rate, you can reduce the interest payable on your loan.
Here are a few tips on how to reduce or avail of a home loan interest rate. Read on!
Short loan tenor
Loan tenor is one of the primary factors affecting the housing loan interest rate. The longer the tenor, the higher will be the payable interest. You should avail of a home loan with a short tenor. In short, you won’t have to pay a higher interest amount. Keeping a small tenor will help you to pay off the maximum EMI per month. Hence, you may close the loan deal at the earliest.
Home loan EMI consists of two parts: the principal loan amount and the interest payable on the loan amount. During the first few years of your loan period, you pay more towards the interest than the principal loan amount. But, if you try to make prepayments, it will help you to reduce the interest as well as the principal amount. Some lenders do not charge any prepayment fee allowing you to prepay your home loan, while others do. Hence, you should check with your lender about the prepayment charges beforehand.
Research on interest rates
To avail of the lowest housing loan interest rate, you should always conduct proper research. It should be on the various home loan deals and their interest rates in the loan market. You can visit the official websites of the home loan providers or a third-party site. This way, you may compare and check out all available housing loan interest rates and pick an offer matching your needs.
Higher down payment
Most lenders offer a major proportion of the property value. And you are required to pay a minor percentage of the property value. However, if you can contribute more as a down payment, you can reduce your loan amount. And once done, simultaneously, the interest payable too will also go down.
Home loan balance transfer
When you make prepayments on your loan, you may find your home loan interest rate higher on the outstanding loan amount. In such a case, you can opt for a home loan balance transfer facility. A home loan balance transfer is an easy option today. It lets you transfer your outstanding loan amount to a new lender charging a lower rate than the current one. It may help you to avail of a lower housing loan interest rate.
How much home loan can I get?
You can use a home loan eligibility calculator to know the amount of home loan you can avail of.
With a home loan eligibility calculator, you need to input your net monthly salary, loan tenor, other monthly income and current EMIs.
Once you click on the “Check Your Eligibility” button, the tool displays the exact home loan amount.
To meet your housing finance requirement, it is essential to keep a check on the above-mentioned key points.
All these can help you to avail of the lowest home loan interest rate and pay lower EMIs.
Rehan is a student of Masters at the University of Birmingham. He loves writing about business, finance, technology, and life. He believes that sharing knowledge with the public is the best thing that one can do for the world and humanity.