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 equated monthly instalments (EMIs). But the EMI’s impact your monthly expenditure over a long period of time.
Let us look at how you can reduce this extra burden on your finances. If you plan well and manage your loan with care, you can turn your dream into reality.
Here are some tips to reduce your home loan payments in a cost-effective manner:
Higher Down Payment
To reduce the principal amount you can make a larger down payment. This 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 larger 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 reliability to transfer your home loan from existing lender to another one. You just need to look for a 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 greater 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.
Choose Long Tenure
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 EMI amount will reduce. In this way, your monthly loan repayment burden might be smaller.
Note that a long tenor can reduce your EMI, 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. This will help you decrease the principal amount thereby saving interest on later payments.
Increase The EMI
You can also cut down your loan burden by increasing the EMI amount. As time goes on, you might also get a hike in your monthly pay after some time. This would enable you to pay more as EMI. An increased EMI 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 record, your lender may consider lowering the interest rate, thereby reducing your EMI burden.
It is not impossible to turn your dream home into 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.
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