Applying for Home Loan? Reduce Your Property Loan Interest Burden
Loans may be required by different individuals for different purposes. However, most loans are taxing commitments that usually continue for 15- 20 years. Thus, putting aside a lump sum monthly for such a long time without fail can be financially and mentally exhausting. Whether it is a home loan or a property loan, one must consider their interest rates before availing of these loans.
Home loan interest rates are comparatively lower than the property loan interest rate. So, if you want a home loan, opt for one which you can pay off quickly without really feeling the pinch in your pockets. Following are a few simple tips on how to reduce your home loan interest burden so that your loan journey is smooth.
Tips to Reduce Property Loan Interest Burden:
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If you want to buy a home and want a loan at a lucrative interest rate, a home loan is the best option for you. Although a property loan offers a similar loan amount to that of a home loan, the property loan interest rate is much higher than that of a home loan. In order to make affordable housing for all, the govt. of India has kept housing loans cheaper than others. Further, you can follow these steps to reduce your mortgage loan in India's home loan interest burden.
Opt for the Right Loan Tenor-
The loan tenor is one of the primary factors responsible for the interest you pay. There are two ways to approach or calculate your home loan tenor, each based on your budget and requirements. For a short home loan tenor, you will pay a greater EMI but a shorter tenor will help you negotiate for a lower interest rate with your lender. On the other hand, opting for a longer home loan tenor, allows you to pay a convenient EMI amount every month but you end up paying more toward interest. Thus, to have the best of both worlds, decide on a loan tenor that will neither impact your budget too much nor will you have to bear the burden of massive interest. Amiddle path can make home loan repayment easy and comfortable. A home loan EMI calculator can help you calculate the right loan tenor.
Look for Low-Interest Rate Deals-
Being consistent and timely with your debt, and EMI payments, and having a high CIBIL or credit score, gives you a chance to get a better home loan interest rate and property loan interest rate. These two factors give you the bargaining power to negotiate with the lender for lower interest rates. When a lender is satisfied with a borrower’s financial credibility, they charge a lower rate of interest, which in turn helps to reduce the burden of home loan interest. In case you get a salary increase, you can also increase your EMI slightly by talking to your lender and paying off the loan amount more quickly.
Prepayments are a Good Option-
Prepayment is a good way to reduce the interest rates on your home loan. Most lenders do not charge foreclosure charges for floating-rate loans. So, if you have availed of a floating-rate home loan, try to make prepayments from time to time when you receive a bonus or salary hike. This will help you in the long run. How? During the first few years of your loan tenure, more payment is made towards interest as compared to the principal amount. Frequent prepayments bring down the principal amount, thereby reducing the total interest. Prepayment for property loans may not however be a good idea as prepayment charges are often levied by lenders on such loans and prepayments, in this case, do not always help to reduce the property loan interest rate.
Conclusion-
PAY MORE AS ADOWN PAYMENT-
Most lenders and financial institutions finance 75% to 80% of the total value of the property. Thus, you will be required to pay a minimum of 20% of the property value at first. However, instead of paying the minimum, it is better to contribute more from your pocket as a down payment. The more you pay initially, the lower will be the loan amount, which will directly reduce your interest burden for the home loan. Further, when you pay a higher down payment, you get a chance to negotiate with your lender for a better interest rate.
As we all know you can also reduce your home loan interest rate by shifting to the floating rate regime from the fixed-rate loan regime. Often lenders do not disclose this in detail to you but thorough research can help you understand how floating interest rates can also help to reduce the interest rate burden in home loans. Considering a switch might be a good idea right now as home loan interest rates are at a low now. So, consider these factors before or after taking your home loan to reduce the burden of interest and achieve the best home loan interest rate you can get.
