Most people aspire to buy their dream home but are apprehensive due to the trailing financial burden. Earlier, owning a house was constrained to the rich, but this myth is now broken with the availability of home loans. Opting for a home loan is the simplest and quickest way to fund your real estate dreams. However, repaying the home loan is not an easy process, but can be achieved with careful consideration and consistent planning. Listed below are tops tips on how to reduce your home loan interest rates to speed up the process of real estate investment.
Do a complete research
Watch out for different loan options provided and analyse which financial plan offers the least interest rate. Before you start looking for various choices, determine your eligibility. Consider your various modes of income and fix on an EMI that is affordable. Being aware of your financial condition will help you make a wise choice while looking out for the right home loan interest rates. Compare the prices and interest rates regularly to keep yourself updated. Avoid delay in property investment and make quick and informed decisions. Be aware of the changing real estate policies before investing in your house, especially when you’re planning to take a loan. Also, make sure you consider the subsidies on loan interests that are available for middle and lower income groups.
Increase your EMI from time to time
Paying extra EMI from time to time greatly reduces your interest rate. Utilise the bonus amount you receive during festive and appraisal seasons to increase your EMI. This, in turn, will have effects on your interest rates. Furthermore, increasing your EMI for a year can be taxing but has a generous effect on reducing interest rates in the long run. Revising EMI amounts periodically is a reasonable strategy from the borrower’s end. However, make sure to document all your timely changes to avoid last minute confusion. Remember, it is always better to close your home loan prior to the deadline.
Reduce your repayment time.
Repaying a home loan in a shorter period reduces your stress drastically. Although the reduction in time comes with a hike in interest rates, make a vigilant choice keeping in mind your affordability. Opting for a longer EMI tenure sounds like a tempting option to lessen the EMI per month but you will end up paying more interest in the end. Make regular payments to avoid piling up the amount to repay. You can also hasten the repayment process by availing tax reduction on home loans.
Avail the home loan overdraft facility
A home loan overdraft works by linking your savings account to the loan account. An overdraft is considered as a prepayment that reduces the borrower’s loan accountability. Deposit the additional cash in hand as an advance for your loan. By doing this, your interest rates, as well as loan tenure, will reduce. The money that is deposited as a prepayment can be withdrawn from the account if needed. However, remember that removing the surplus amount will result in an increase in the interest rate. Be sure to take the money only if there is an emergency. This option is ideal for people having a regular surplus income.
Refinancing is a process of shifting loan balances from the current lender to one that offers lower interest rates. You could also choose a new lender to reduce the loan duration. However, transferring loan dues might incur some additional charges for documentation or service. The decision should be taken based on your financial condition. Additionally, you can consider refinancing your home loan while shifting from fixed to floating interest rates. Refinancing is not advisable for people who are nearing the end of the tenure. Consider shifting only if your payment tenure is long. Use refinancing as a weapon to negotiate interest rates with your current lender.
These tips on how to reduce your home loan interest rate will help you plan your finances better while investing in a property. If you are on a hunt to spot your dream home, reach out to a reputed real estate developer like Lancor.