Buying a house is a massive financial investment, and a Home Loan helps you fill the fund gap. You repay the amount in simple monthly instalments. However, the EMIs on your Home Loan can severely strain your monthly budget if you do not have a proper plan. It can even lead you to pay more for your loan.
Select the correct mortgage type and choose the right financing. Use a Home Loan interest rate calculator to get accurate EMI calculations and plan your repayment accordingly. In addition, the following points can help you negotiate a lower interest rate on your Home Loan.
Ensure That Your Credit Rating Is Good
Financial institutions use credit reports and scores to determine if you can pay down debt on time. If your credit score is 750 or higher, you will have a better chance of getting a lower interest rate on your Home Loan.
You will achieve this gradually as you pay your bills, debts, and dues on time. Also, maintaining a credit utilisation ratio under 30% can be beneficial.
Reduce The Loan Amount By Making A Larger Down Payment
When buying a house, a planned approach will be beneficial. Consider making a larger down payment to reduce the loan amount and lower the interest rate.
Banks or financial institutions usually provide 75% to 90% of the property value, depending on the borrower’s eligibility. Make sure you plan accordingly and borrow less to pay less interest.
With some lenders, you can review your EMI every year with kotak home loan eligibility calculator. If your income increases consistently or you receive a raise, you may be able to increase your EMI. As your EMI increases, your tenure will shorten, and as a result, you will see a significant reduction in your interest rate.
Choose A Shorter Tenure
One of the main factors that affect your interest rate is the term of your loan. It is true that longer tenures reduce monthly instalment payments.
However, a shorter duration will reduce the total interest amount over the loan term. Depending on your financial situation and other obligations, choose an option that suits you best.
Look For Seasonal Offers And Compare Interest Rates
Before selecting a particular product or lender, it is crucial to compare loan products and rates. This process allows you to find the best option based on your requirements and eligibility by evaluating various lenders.
It is also advisable to keep an eye out for deals during the festive season when banks typically lower their interest rates. Contact your lender to inquire about any available options that may suit your needs.
Moreover, banks may offer preferential rates to existing customers or those with good credit histories. Maintaining a responsible borrowing history by making timely payments could potentially result in a lower interest rate.
Going For Floating Interest On Your Home Loan
Floating interest rates are subject to change with market or benchmark rates, unlike fixed interest rates. These rates are usually 1% or 2% lower than fixed rates offered by the same lender since they directly depend on the market.
This lower interest rate can result in more money saved each month, which appeals to some borrowers. Even if the floating rate exceeds the fixed rate, borrowers need not worry since this is temporary and will not affect the loan’s entire tenure.
Prepayments Are A Feasible Option Too
Prepayment or foreclosure fees do not apply to floating-rate loans, making periodic prepayments a viable option. In the first few years of your loan, your interest payments are higher than your principal payments, making prepayments more frequently can substantially lower the principal amount and reduce the interest amount.
When it comes to Home Loans, owning a home is a significant commitment, and taking a systematic and well-planned approach is essential. Maintaining a long-term work history is also critical. Lenders tend to prefer people with a steadily growing income and a long history of working at the same place. A loan officer will verify your employment status before processing your loan, and erratic job history can affect your chances of getting approved for a Home Loan.
The Endnote
We all dream of owning a home, and Home Loans have become an essential and inevitable part of our lives. One of the most significant commitments in life is paying off a Home Loan. Opting for a Home Loan using a systematic and well-planned approach will help you lead a stress-free life.
If you have already taken out a Home Loan, changing to a lender who offers lower interest rates is ideal. To move forward seamlessly with your Home Loan application, ensure that you review every detail of the Home Loan required documents. Considering these factors before or after applying for a Home Loan can help reduce your interest burden and lead to a stress-free life.
Besides this, changing to a lender offering lower interest rates is ideal if you have already taken out a Home Loan. To move forward seamlessly with your application, ensure that you review every detail of the Home Loan required documents. Reduce your interest burden by considering these factors before or after applying for a Home Loan.
