When taking a housing loan, one of the key factors to consider is the home loan interest rate. While it is true that the rate of interest offered against such loans depends on the borrower’s profile, lending terms, and the type of interest chosen, there are ways to bring down the interest burden. Here in this article, we have the best tips for readers to reduce home loan interest rate, so read on!
7 Tips to Lower Home Loan Interest Rate
-
Opt for a Shorter Tenor
Home loan tenors typically extend up to 25-30 years, a period long enough to allow borrowers to repay the loan amount with ease. Such a long tenor surely helps cut down the home loan EMIs or monthly installments. However, to think of it practically, a shorter tenor, say about 10-15 years, helps lower the overall interest payable. Thus, one can use a online house loan EMI calculator and see for themselves how the housing loan rate of interest drops drastically when opting for a shorter tenor.
-
Go for Prepayments
As per the guidelines of the Reserve Bank of India, prepayment or foreclosure charges are not applicable on floating rates of interest. Therefore, one can easily opt for prepayments from time to time, which can be beneficial in the long run. This is because paying more towards the loan interest during the initial years of the repayment plan can substantially lower the principal amount, thereby reducing the interest burden. However, since the same benefit is not offered in the case of fixed rates of interest, opting for the latter will not make sense.
-
Compare Home Loan Interest Rate Online
Comprehensive research is all-essential when looking for a housing loan that fits the budget and offers the best home loan rates. With a myriad of third-party websites available, it is advisable to compare different lenders offering different home loan products and interest rates.
-
Consider a Home Loan Balance Transfer
A home loan balance transfer is a great opportunity to transfer your outstanding home loan to a new lender who might offer you better, cheaper rates of interest. However, one must keep in mind that the balance transfer comes into the picture only when the borrower has started making prepayments and when there’s a huge amount left to be paid. Also, any missed payment on balance transfer-based loans will invite a penalty or additional charges. Therefore, a home loan balance transfer should ideally be the last resort.
-
Pay a Hefty Down Payment
Most lending institutions and banks offer to pay about 75-90% of the total property value when it comes to housing loans. The borrower is only required to pay the remaining 10-25% of the value. However, if you wish to lower your home loan interest rate, opt for a larger down payment. This is because, the higher you pay during the initial phase, the lower will be the interest burden throughout the repayment tenor.
-
Improve Your Credit Score
Lenders are always inclined toward borrowers with a decent credit score and good repayment history. Most lenders, including Bajaj Housing Finance Limited, offer lower home loan interest rate for customers who have a credit score of over 725. The current home loan interest rate offered ranges between 8.25% and 15%. The higher the score, the better the chances of getting a great deal. Therefore, to improve your credit score and enjoy affordable home loan interest, make sure you pay your credit card bills and other dues on time and clear any outstanding debt at the earliest.
-
Increase the Payable EMI
Some lenders allow borrowers to modify monthly installments annually. If you have recently bagged a more lucrative job or gotten a promotion, you can choose to pay a higher EMI to reduce the loan tenor, and consequently, the payable home loan interest. It is always a good idea to check with the lender regarding such payment options.
The above factors are surely recommended for all borrowers looking to reduce their home loan interest burden. Once you have fetched the desired interest rate, use a housing loan EMI calculator to assess the monthly installments, and apply for a home loan online for a faster and seamless experience.
