How to Prepare for Rising Home Loan Interest Rates
Availing a Home Loan for funding the purchase of a dream home comes with another thing which you need to manage – the repayments. Yes, repaying a house loan is a lengthy process as it may have a tenor anywhere between 10-20 years or more.
Thus, if you have not worked on your housing loan repayments earlier, the housing loan EMIs can easily cough up a significant portion of your monthly budget. As a result, you may find it tough to manage your monthly spending and other family needs.
To reduce the Home Loan rates burden, there are various ways that you can implement. Of the most important factors in this regard is – taking care while finding the right lender offering you the lower Home Loan interest rate in the market. Another thing is ensuring that they offer MCLR-based rates to reflect lower prices faster.
Besides these two vital factors, this post will discuss some tips to help reduce your burden of the Home Loan interest rate.
Opt for a Short Tenor
Yes, you read that correct! A longer tenor will mean that you will pay more compounding interest over the tenor and means eating up more of your money, overall. Thus, while opting for a House Loan, it is worth considering to choose your loan tenor. You can use a housing loan EMI calculator at a lender’s website free to adjust your loan’s tenor so that you can arrive at a tenor matching your income well. Paying the same EMI will be easy for you as you will be confident to pay it off as time passes.
Make Regular and Consistent Prepayments
Always remember that your loan EMI consists of two elements – the principal and the interest rates charges on the borrowed money. During the first few years of the repayment, a Home Loan borrower makes payments towards levied interest and less for the principal. Thus, you can focus on making some part prepayments while you are working using your performance bonus, salary increment and other income. Some of the known names in the field of Home financing can help you as they don’t charge any money for making part prepayments. Overall, making consistent payments towards your Home Loan helps to lessen the levied total interest on you.
Opt for a Home Loan Balance Transfer
Is your existing Home Loan lender charging a higher interest rate which is not helping you save money out of your monthly income? You can opt for Home Loan balance transfer facility and switch your Home Loan account from one lender to one offering a lowering rate. For enjoying a better rate using the loan balance transfer, you will need to pay 1% or more of the remaining principal as processing fee. Like this, you will be able to bring down your interest rate and enjoy paying lower EMIs. Also, you can also avail of the facility of the top up loan which will help you enjoy up to Rs.50 lakh to cover the cost of your other financial goals. The lenders let you take up a top up loan at just 1-2% more than Home Loan rate along with an extended tenor.
The Bottom Line
The relevant tips to help you bring down your Home Loan interest rate is no more a secret. You can analyze your needs and then implement the mentioned tips to bring down your Home Loan interest rates. All the best!