Reduce Your Home Loan Interest Rate
If you are considering getting a home loan but worried about a higher interest rate, know how to get a lower interest rate. Purchasing a home is one of the largest financial decisions one can make and is something most people aspire to do.
Before applying for a house loan, you need to keep certain things in mind. First is your eligibility, determined by your income and ability to repay. The total cost of your loan includes processing charges, overhead, service charges, etc. Using a housing loan EMI calculator is best to assess loan eligibility.
But is it possible to lower the loan against property interest rates?
Yes, indeed! Here, we outline some reliable strategies for ensuring that you pay reduced home loan interest rates and avoid drilling a hole in your monthly budget.
8 Ways to Reduce Home Loan Interest Rate
1. Maintain a Good Credit Score
How you handle borrowed money is shown in your credit score. A score of above 650 is favourable because it indicates financial soundness. Lending institutions would see you as a trustworthy borrower and provide you with a loan at a lower interest rate. So, keep track of your payment history, credit history, loan amount, and other credit you are currently using to raise your credit score.
2. Make a Big Down Payment
While considering a home loan, you need a well-thought-out strategy. A bigger down payment benefits you with a smaller loan and a much cheaper interest rate. Most financial institutions lend between 75% and 90% of the property’s worth, make an informed decision, and borrow less money, so your loan against property interest rates is minimal.
3. Decrease the Loan Tenure
Your loan’s term is one of the main determinants of the amount of interest you will pay. Longer terms may result in lower EMIs, but you will ultimately pay more interest. In contrast, choosing a shorter term will result in a little higher EMI but a far lower overall amount of interest paid. However, remember this, the chances of your home prices increasing in the long run are higher. So, even if you are paying higher interest for a longer tenure, it may prove to be beneficial in the long run.
4. Compare Interest Rates Online
Before choosing a loan, conduct in-depth research using a housing loan EMI calculator to compare rates online. Before selecting the lending institution, it is ideal to understand each institution’s home loan interest rates and other charges such as processing fees, etc.
5. Choose A Floating Interest On Your Home Loan
Compared to a fixed interest rate, a floating interest rate fluctuates with the rest of the market. Since it is based on the market, it is typically 1 or 2 percentage points less expensive than the loan provider’s fixed rates. Some borrowers find it enticing because a lower interest rate translates into more monthly savings.
6. Revise EMI Every Year
Some lending institutions allow you to modify your EMI once a year. This option allows you to increase or decrease EMI as per your income situation. Although it may initially appear strange, the higher your EMI, the shorter your tenure will be, and as a result, the interest rate will drop significantly.
7. Refinancing Your Home Loan
Approach your current loan provider for a rate reduction if you believe you are not receiving favourable conditions from them. Most lending institutions will try to keep their loyal clients, and they could even comply. If the loan provider doesn’t accept, transfer the loan to a new loan provider. All you have to do is look for a different loan provider with interest rates that meet your needs and ask about any additional fees they may charge.
8. Don’t Skip Payments
Banks might consider you a defaulter and take action if you don’t pay your EMI for three months. Your collateral might forfeit if you can’t pay your debts in full by a set date, according to a notice that the loan provider will send. One default is sufficient to lower your credit score by at least 50 to 70 points. Request your loan provider for an EMI-free time if your income is interrupted.
Everyone aspires to own a home, making home loans a necessary and inevitable aspect of our lives. The interest rates on house loans are now favourable, making this the perfect moment to apply. Moving to a loan provider with lower interest rates would be best if you already have a loan. A housing loan EMI calculator can help you find the best interest rates online. Living stress-free requires a systematic, organised approach to obtaining and repaying a house loan.