Home loans come with a principal amount that is directly used for the residential property ion concern. The interest outgo on housing loans is comparatively higher as well. The financial capabilities of a borrower might not remain the same throughout the repayment tenor of a loan. While he/she might have surplus funds available at one point, fund shortage during any time of the tenor could turn the loan into a huge financial burden. One way to work around such possibilities is to try reducing interest payments on such loans.
Decreasing the interest liability on a home loan also helps in increasing the monthly disposable income of a person. This means, when a borrower has to pay the lowest home loan interest rates, he will have a substantial share of his income to spend on other expenses. By reducing the interest outgo, the amount that a borrower saves can also be utilized to fund the various hidden costs while buying a home.
Effective ways to reduce home loan interest rates
Alongside the funds availed through a home loan, a borrower also has to contribute a considerable amount of the property cost from his own savings. It is thus a huge financial undertaking, which has to be planned well beforehand. Some informed and smart moves towards availing a loan can prove extremely beneficial for the borrower. For instance, paying lower home loan rates of interest will help repay the loan easily.
Here are some ways which can help to bring down the interest rates on a home loan –
Choosing an overdraft facility for a home loan
Many lenders provide customers with the option of depositing money through an overdraft facility in the home loan account. This allows the borrower to deposit any additional amount available into the home loan account. Paying surplus alongside the regular EMIs directly reduces the interest payments as well as the repayment tenor of the housing loan.
Pre-payment of home loan whenever possible
Pre-paying a home loan is a great option for employees who enjoy annual bonuses. Whenever they avail additional funds, they can utilize it to pay a certain portion of the remaining principal. Note that prepayment may attract charges as per the amount of prepayment made.
Balance transfer of home loan
Borrowers of home loans can consider opting for the balance transfer facility if a lender offers home loans at a lower rate of interest compared to the existing lender. However, there are certain fees involved which borrowers need to pay while opting for a balance transfer. One must calculate all the expenses involved before transferring the loan in order to be sure of enjoying the benefits of lowering down the total interest paid.
Checking and comparing interest rates
Keeping a regular check on the interest online will help a borrower spot the lowest home interest rates available in the debt market. Even if you have already availed a home loan, you can frequently check the interest rates being charged by other lenders. If you find a lender charging much lower interest rates, you can switch your existing loan with that new lender.
Opting for a shorter repayment tenor
A lengthier repayment tenor denotes higher overall interest expenses. When you select a shorter tenor, your monthly installments might be higher. However, paying off a debt faster results in much lesser interest outgo.
Most lenders now offer a home loan tenure calculator for complimentary usage of borrowers. They can use the loan EMI calculator to check the monthly estimated EMIs they would have to pay in correspondence with the chosen repayment tenor.
Intending to pay lesser interest on availed funds is a great way to pay off home loans faster.
Responsible borrowers often plan the repayment of a loan even before availing it. At the same time, he can look for ways to bring down the interest outgo by availing the lowest home interest rate or by following certain strategies.