Owning your own house provides security and comfort of mind. This is why most people aspire to purchase their own home. People who live in rented accommodation try to arrange for an adequate down payment and a housing loan to finance the property.
A home loan is one of the most effective strategies to own a property. Financial institutions, including banks and NBFCs, look at the home loan eligibility of the applicant before sanctioning the money. However, before taking out a loan for a house, it is essential to understand the impact of a high-interest rate on your repayment schedule.
A home loan is for the long-term, and a higher interest rate, in addition to the principal amount, may lead to significant EMIs, compromising your monthly budget. So, if you plan to take out a home loan, the simple tips listed below will assist you in lowering your housing loan interest rates.
Tips To Reduce Home Loan Interest Rates
Some of the essential tips for lowering your interest rates are listed below.
Select The Property Based On Your Budget
It is critical to look for a suitable house within your budget. Before making a decision, consider the location and the essential amenities offered. Under-construction apartments are typically available at a significant discount to ready-to-move-in properties. This will help to minimize the principal amount of your loan.
Arrange For High Down Payment
It is best to plan for a larger down payment when taking out a housing loan. Lenders often give the lowest interest rates to borrowers that maintain a low loan-to-value (LTV) ratio by making larger down payments. As a result of the decreased principal amount and interest rate, your EMI will be reduced.
Compare Interest Rates
The interest rates charged by various lenders differ. Customers with good credit scores are generally offered loans at low-interest rates. Furthermore, taking a joint loan with your spouse as a co-applicant can also help in reducing the rates. Before settling on a specific product or lender, you should conduct thorough research on loan products and compare rates.
Select a Short Tenure
It is important to note that the longer the loan tenure, the higher the total interest paid. Though extended terms, such as 20 to 25 years, reduce the EMIs, shorter tenures, such as 10 to 15 years, assist minimize the total interest payout. Hence, selecting a shorter repayment period is the best strategy and is less expensive in the long run.
Increase Your EMI
If you have switched jobs and have more money, it is recommended that you begin paying higher EMIs. This will enable you to minimize your tenure and, ultimately, your housing loan interest rate.
Transfer the Home Loan Balance
Another alternative is to transfer your house loan balance to a different lender that offers low-interest home loans. This option allows you to transfer your outstanding balance from your present lender to a new one that provides a better rate.
Buying a house is a wish for many of us, and one may quickly realize that dream by taking out a loan for a house. However, the above guidelines can help you lower your overall loan burden and make you a proud owner of the property at an affordable price.