If you want to buy a home, taking a home loan becomes inevitable. Along with the home loan comes the burden of interest. A home loan is a big financial commitment. You can pay it off in an equated monthly installment (EMI). But the EMI’s impact your monthly expenditure over a long period.
Let’s take a look at how to lower interest rate on home loan and relieve this extra burden on your finances. If you plan well and manage your loan with care, you can turn your dream into reality.
Tips to Reduce Interest Rate on Your Home Loan
The following cost-effective tips will help you reduce your home loan payments:
Higher Down Payment:
To reduce the principal amount, you can make a larger down payment, which will bring down the amount of loan that you need. Remember, the interest gets calculated on the principal. If the principal is small, the interest will also be lower. Thus, you can avoid paying extra interest by paying a more substantial amount as the down payment; this will be very helpful in the long run.
Transfer your Loan to another Lender:
It is an option which gives you the reliability to transfer your home loan from existing lender to another one. You need to look for a mortgage lender who offers better terms and conditions that suit you. Calculate the costs involved in with your existing lender and the new one. See if any pre-approved offers are available to you. Always make sure that the costs are not higher than the savings you will gain with your new lender. Use the home loan calculator to find out whether a changing your lender can help to save interest.
If you choose to pay over a longer tenor, the principal amount and the interest payable will get divide over more months. So, if you pay over a long period, your equated monthly installment amount will reduce. In this way, your monthly loan repayment burden might be smaller.
Note that a long tenor can reduce your equated monthly installment, but it can increase the amount you pay as interest. You may end up paying more over the entire duration of the loan.
Early pre-payment can go a long way in reducing your home loan burden. It can cut down the interest as well as the period of the loan. If possible, pay a part of the total loan amount in the early months or years of the tenure. You decrease the principal amount, thereby saving interest on later payments.
Increase the EMI (Equated Monthly Installment):
You can also cut down your loan burden by increasing the EMI amount. As time goes on, you might even get a hike in your monthly earnings after some time, enabling you to pay more EMI. An increased equated monthly installment amount will reduce the principal amount. As a result, the interest will also decrease. For that, you can utilize the online home loan EMI calculator to get a fair idea.
Negotiate with your Lender:
If you make your repayments on time, you can negotiate with your lender for a reduction in the interest rate. If you have a good payment history, your lender may consider lowering the interest rate, thereby reducing your EMI burden.
It is not impossible to turn your dream home into a reality. Look at the different loan options available in the market and make an informed decision. Institutions also offer many pre-approved loans. These are of great help if you need funds in an emergency. Plan your home loan with the right lender and pay EMIs without feeling the pinch.
Hope these tips to reduce interest rates on your home loan will be of value to you.