Applying for a home loan is the easiest go-to option when buying your dream house. This is why it’s also the most sought after, with people queuing up at banks to assess their eligibility. Once approved, a home loan is generally granted for a longer duration, say 20 years. While this essentially aims at providing borrower convenience, longer tenure inevitably means higher housing loan EMI.
Besides that, until you pay the last penny up to the specified loan tenure, you’d need to keep paying EMIs with interest. The longer you pay EMIs, the more home loan interest they’d squeeze off your monthly expense. Yet, there are ways to bring down the interest burden. Here are 5 tips to do so.
Housing Loan EMI: Top 5 Tips to Reduce
Opting for a lender who offers the lowest interest rate is always advisable. Besides that, keep the following in mind at the onset of loan application:
1. Keep the loan tenure short:
We now know that longer tenure means more EMIs and, most important, more interest too. You have the choice to decide on the tenure for loan repayment before signing for one. Be careful and choose wisely. Besides that, you can take help from a home loan EMI.
It would help you choose a duration wherein you can pay the maximum amount of EMI. Don’t worry though because EMI payment would only get more comfortable proportional to a salary increase in the future.
2. Prepay regularly:
In the initial years of loan repayment, it’s wiser to reduce home loan EMI via salary incentives. Consider prepaying part of the loan. This would help lower the burden towards the latter years when you may not be able to earn as much.
Use your bonus, increments and the like towards making regular prepayments of some parts of your loan when you can. By doing so, you can contribute towards reducing the principal amount and in turn the interest levied thereon too.
3. Consider loan balance transfer:
A number of lenders offer this option. Consider it in your own interest. You don’t necessarily need to keep paying EMIs on the same ROI decided upon at the onset of the loan.
You can always choose to transfer the remaining loan amount to another lender if the latter offers a lower interest rate. Lower ROI means lower burden of loan repayment. Besides that, most banks agree to transfer loan balance from the current lender to a new lender on no extra charge.
4. Make annual EMI revisions:
Certain lenders may agree for annual EMI revisions for the borrower. This means that in the case of salary hikes, you can opt for higher EMI payment and eventually reduce home loan EMI.
Generally, even a 5% increase in your EMI per year can bring down the tenure, thereby lowering the interest rate.
5. Consider higher down payment:
If you can afford one, you wouldn’t need to take a huge loan amount. This means lower interest payment too on a lesser principal amount.
These few vital points can considerably reduce the financial burden over the years.
Also view Home Loan EMI: Factors Affecting It
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