There is no doubt that a home gives one a sense of financial security. Being a significant investment, purchasing a house can burn a hole in one’s pocket due to the rise in real estate costs. Taking a home loan doesn’t just make home purchases affordable but also acts as a tax-saving instrument. In the end, one gets a high-value property that can be rented out or used for residential purposes. But there are times that home loans become a burden to the borrower for various reasons. If you find it burdensome, it could be because of not planning the monthly EMI or choosing a lender who offers a higher interest rate, etc. Here are a few tips to help borrowers understand what might be going wrong.
Below are 7 smart tips to lower your repayment burden:
Higher Down Payment
Making a higher down payment while obtaining a home loan will lower the principal amount, which means you will have a lesser amount to repay—a lower principal amount and lower interest rates. If you wonder how much down payment is to be made to reduce the interest amount, the answer depends on the financial institution you choose. Most financial institutions fund only a maximum of 90% of the property value based on the home loan eligibility. The borrower will be expected to pay the rest of the amount as a down payment. Paying more than the minimum down payment requirement will help you decrease the interest rates further than what is offered to you.
Plan for Optimum TenureÂ
Choosing suitable home loan tenure is tricky. Long tenures will increase the interest, but the EMIs will be affordable. If you opt for a shorter term, you will have to pay a higher EMI but lower interest rates. Although lower interest rates look lucrative to choose shorter tenure, the monthly EMIs could end up stressing your finances and burdening you. Choosing mindful loan tenure that does not strain your EMI nor has a higher interest rate will help you hit a middle ground.Â
Choose an Affordable EMIÂ
Planning your EMIs with a home loan EMI calculator can also reduce your EMI budget considerably. The calculator will help you calculate your monthly installments and arrive at a tenure that has an affordable EMI. The calculator also displays the loan amortization chart according to the calculation to help you plan your loan better.
Add a co-applicant
Adding a close family member with an excellent credit score and good income can help you negotiate lower interest rates as it increases your repayment capacity
Keep existing debts to a minimum
Pay off your existing debts, or keep it as low as possible to get better interest rates on your home loan as it increases your repayment capacity
Prepayments and Part Payments
Making partial prepayments significantly impacts home loans and helps you save on interest during the tenure of the loanÂ
Making as many prepayments as possible whenever you receive extra funds above your budget considerably reduces the home loan burden over time. You can calculate the changed EMI using the EMI calculator to plan your loan after prepayment.Â
If you have chosen floating loan interest rates, you can make loan repayments without prepayment charges. Additionally, floating interest rates are at an all-time low, and lenders do not levy prepayment charges on these loans. Hence, changing your interest rate type to a floating-rate loan will help you obtain more advantages. Revising your EMIs with any bonuses or salary hikes will help you wrap up the loan quicker than usual.Â
Opt For a Home Loan Balance Transfer
Look for lenders who offer lower interest rates. A lower interest rate translates to a lower EMI. Opting for a home loan balance transfer with a lender who offers a lower interest rate will decrease your loan burden considerably. That said, one should be careful to keep an eye out for other service charges levied by the lender, which can later amount to a higher figure. Clarify the late payment penalty, check bounce fee, processing fee, prepayment fee, and any other charges levied by the financial institution to make an informed decision if the balance transfer will be beneficial to you compared to the current situation.Â
Home loans are long-term investments that span up to 30 years, depending on your loan amount. Exploring the market offerings, planning the loan by checking for options to reduce the loan burden will help you repay your loan without any financial hiccups and finish the long-term commitment sooner. Choose a lender that offers low-interest rates starting at 7.99% per annum and good customer service to make your loan process more hassle-free. Apply for a balance transfer today!